Beige Book Report: Atlanta
March 5, 2025
Summary of Economic Activity
The economy of the Sixth District grew at a modest pace, on balance, from January through mid-February. The labor market was relatively unchanged, and firms continued to report plans to maintain flat headcounts. Firms reported modest increases in wages, input costs, and prices. The higher cost of living remained a top concern for community organizations, and low-wage job seekers encountered challenges with job searches. Retail sales declined somewhat, but travel activity was steady. Housing demand declined slightly as mortgage rates ticked up and affordability declined. Commercial real estate conditions were mixed. Transportation activity grew modestly. Demand for manufacturing increased slightly. Banks saw moderate loan growth across portfolios. Energy demand rose modestly.
Labor Markets
Employment was little changed since the previous report. Most firms reported flat headcounts and noted plans to keep them relatively stable in the coming months. Labor availability remained much improved from recent years, as firms reported that they are generally able to hire and retain workers. Many contacts noted risks to the labor supply from potential changes to immigration policy. While these concerns were particularly acute among firms that rely heavily on immigrant populations for labor, others noted concerns about increased competition for workers if immigration policy leads to a tighter labor market.
Wage growth was modest over the reporting period. Many firms characterized wage growth expectations for this year as similar to 2024 wage increases, mostly in the two to four percent range. Businesses generally noted positions seeing the most wage pressure tended to be entry level.
Prices
Sixth District firms reported modest growth in nonlabor input costs and in prices over the reporting period. Cost pressures persisted for insurance and construction, and some businesses noted moderate increases in freight rates. Many contacts reported difficulty setting prices and noted ambiguity around costs, largely as a result of uncertain international trade policy. Most firms said they expected to pass through the bulk of any additional costs to customers. Some firms noted revising contract structures to mitigate cost risk, such as by eliminating guaranteed maximum pricing. Despite slightly increasing cost pressures, some consumer-facing firms reported the need to be selective and creative with price increases, as customers were more price sensitive.
Community Perspectives
Concerns about the cost of living remained top of mind among community contacts. In particular, the lack of affordable housing continued to financially challenge many individuals. Job seekers in lower-wage occupations reported declining confidence in the labor market and a more challenging job search experience. Contacts reported that a perceived lack of employer response to job applications also contributed to a growing sense of discouragement among some prospective workers.
Consumer Spending
Consumer spending declined slightly since the previous report. Furniture retailers, in particular, noted declining sales after a bump in late 2024. While some apparel retailers reported slower sales in recent weeks, it was noted as partially seasonal, and their 2025 outlook was positive. However, several contacts noted some softness in discretionary spending, especially among lower-income shoppers. Some casual dining restaurants described customers as being selective, looking for value, and skipping appetizers or desserts, and some quick service restaurants and cafes noted declines in foot traffic and transactions.
Travel and tourism activity was stable in recent weeks. Many contacts reported that demand remained healthy. Leisure travel held steady, and group travel and conventions remained strong. Hoteliers continued to see trends of last-minute leisure bookings. However, tourist attractions noted declines both in the number of visitors and in average spend per visitor.
Construction and Real Estate
Overall demand for housing in the District declined slightly since the previous report, as mortgage rates moved higher, and housing affordability diminished further. Though home prices increased modestly, on aggregate, moderating demand and elevated home inventories created less upward pressure on housing prices. Supply shortages persisted in some markets, but existing home inventory levels rose, on net. Homebuilders saw a modest decline in new home sales; some reported instances of sales below initial asking price or use of incentives to move inventory. Contacts cited mortgage rate volatility as the most significant headwind to housing demand.
Commercial real estate (CRE) conditions were mixed, though some contacts noted improving sentiment since the previous report. Challenges remained in the office sector, and some contacts noted a strategic pullback in office investments. Multifamily was also hindered by elevated vacancies due to an increase in supply, but demand accelerated somewhat, driven by concessions. Contacts noted that lower CRE property values and rising operating expenses eroded net operating income.
Transportation
Activity in the transportation sector grew modestly, on balance. Ocean carriers and southeast ports continued to see robust container volumes. Class I railroads reported modest increases in total traffic, but intermodal freight volumes were generally flat. Freight volumes for short-line railroads were up slightly from year-earlier levels. Warehousing contacts indicated that demand for space remained weak, citing economic uncertainty and an overbuilt supply. Trucking firms noted a decline in truck load volumes, which was attributed partially to winter weather events. Citing increased uncertainty around trade policy, some contacts reported difficulties in formulating a full-year forecast for 2025.
Manufacturing
District manufacturing activity expanded slightly over the reporting period. Some firms noted strong demand, particularly producers of chemicals, transportation equipment, and machinery. A manufacturer of packaging products reported an ongoing softening in demand, mainly for food packaging orders. While some contacts expected demand to improve over the next 12 months, risks to the outlook included changing policies around immigration and tariffs, along with global unrest and weather-related events.
Banking and Finance
Sixth District financial institutions saw moderate loan growth across most major lending categories. Multifamily lending outpaced other categories. Overall asset quality remained stable with low levels of nonperforming loans as a percentage of total loans, and consumer creditworthiness remained solid. Both deposit balances and borrowings by banks increased modestly, though loan growth outpaced growth of deposit balances, increasing loan-to-deposit ratios.
Energy
Oil and gas industry contacts noted modest demand and expected activity to be on par with or slightly greater than last year. Increases were expected to be concentrated in liquefied natural gas (LNG), offshore wind, and international oil and gas opportunities. Contacts described renewed interest in LNG projects since the beginning of the year. Regional utility companies continued to describe increasing power demand from expansion of data centers and population growth in the southeastern U.S.
For more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.