April 15, 2009 Federal Reserve Districts Sixth District--Atlanta

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Sixth District business contacts reported that economic activity remained weak in March. Information from retail and auto industry contacts suggested sales declined, whereas reports on tourist activity were mixed. The outlook among commercial construction industry contacts worsened as vacancy rates continued to rise. However, residential real estate contacts noted modest sales improvements in several areas. Also, while manufacturing contacts noted that production and orders remained very low, their outlook was less pessimistic than last reported. Banking contacts remarked that business and consumer loan demand remained weak while access to credit remained tight. Labor market conditions worsened as more businesses reported layoffs. Price pressures remained subdued throughout the District. Consumer Spending and Tourism District merchants continued to report declining sales and traffic in March compared with a year earlier. Retailers noted difficulty in forecasting sales, planning orders, and managing inventory levels because of the unclear demand outlook and uncertain credit availability. Auto dealers also noted that tight credit was affecting sales. Ongoing reductions in vehicle assemblies was said to have reduced some of the pressure on dealer inventories. Reports on tourism activity in the District were mixed. Convention cancellations, lower attendance, and tighter spending patterns were negatively impacting several locations. However, cruise lines experienced strong bookings as a result of heavy discounting and promotional incentives. Visitor numbers were described as being relatively strong at some popular drive-to destinations, including several theme parks. Real Estate and Construction Reports from Realtors indicated that existing home sales remained weak in March, but in some areas, sales were up on a year-over-year basis, most notably in Florida. New home sales were described as weak, but inventories reportedly declined slightly in March as homebuilders reduced construction further. Some District homebuilders did note a modest increase in buyer interest, along with considerable downward pressure on prices. Housing starts remained at weak levels and the outlook among builders continued to be pessimistic because of high inventories. However, recent improvements in traffic bolstered sales expectations among most Realtor contacts. Commercial real estate activity remained weak. Vacancy rates continued to rise in many parts of the District, putting downward pressure on rents, most notably in the retail sector. District commercial contractors reported more projects being postponed. Going forward, commercial real estate contacts anticipate more space will become vacant in the coming months and that construction will continue to slow. Manufacturing and Transportation The majority of regional manufacturers noted reduced production compared with a year earlier. However, new factory orders, while still well below their year-ago pace, were not as weak as in previous reports. In addition, most contacts were less pessimistic about future production and employment levels. District transportation reports pointed to ongoing weak freight activity in March compared with a year earlier. Auto, chemical, and construction-related rail shipments declined further. Trucking contacts servicing the retail industry noted much lower tonnage than a year earlier and intense pricing pressure. Banking and Finance District lending conditions remained tight in March. Most bankers cited a lack of loan demand, uncertain collateral values, and tighter credit standards as factors restraining the current lending market. Businesses and consumers appeared to be reluctant to take on additional debt in the current environment. Commercial borrowers, in particular, were said to be postponing capital expenditures Employment and Prices Employment conditions in the District deteriorated further in March and the number of workers filing for unemployment insurance increased. In addition to increased layoffs, business contacts noted reductions in hours worked and cuts in wages as tools to reduce business costs. Significant price discounting was noted at the retail level, and manufacturing and construction firms continued to report that prices for both raw materials and finished goods were below year-earlier levels. Energy prices were relatively stable in March. Natural Resources and Agriculture Reports from District contacts indicated that oil and natural gas inventories remained high in March as consumers and manufacturers reduced energy use. The decline in energy demand has caused regional producers to cut back or idle operations. Soil moisture conditions improved in most areas of the District. However, relatively dry conditions were reported in areas of Florida. Weak domestic and global demand continued to trouble the near-term outlook for the District's farm sector. Return to top Richmond Chicago