January 12, 2011
Federal Reserve Districts
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Reports from Sixth District business contacts indicated that economic activity rose moderately in late November and December. Holiday sales were described as generally positive and above expectations. Tourism contacts noted increases for both business and leisure travel. Weakness continued to be reported in the real estate sector as both builders and brokers noted very low levels of activity. Most manufacturers noted a slight increase in new orders and production levels, although those producing construction-related goods continued to experience lower activity. Transportation companies reported moderating freight volumes after significant increases earlier this year. Business contacts continued to report that obtaining loans at acceptable terms has remained difficult, especially for small businesses and start-ups. Bankers repeated that they experienced a lack of loan demand from qualified borrowers. Employment indicators continued to recover, albeit slowly. Most business contacts said that they remain hesitant to add to their permanent workforce until they experienced a sustained increase in sales. A majority of business contacts indicated that current cost pressures remained high, citing increasing material prices and rising labor and benefits outlays. However, most firms remained reluctant to pass input cost increases through to consumers given intense competitive pressures.
Consumer Spending and Tourism
Tourism activity increased slightly relative to a year ago for both business and leisure travel and the outlook remained modestly positive going into 2011. Hotel occupancy rates rose in several of the District's major markets compared with last year. Cruise lines reported an increase in both bookings and pricing power.
Real Estate and Construction
Residential broker reports indicated that the pace of existing home sales growth remained weak compared with a year ago, but declines were more modest than in recent reports. Contacts also indicated that home sales at the low-end of the market weakened notably. Throughout the region, short-sales, REOs, and pending foreclosures continued to put downward pressure on home prices which remained below year-earlier levels in most areas. Realtor outlooks for sales growth over the next several months improved somewhat from previous reports.
Nonresidential construction activity remained at low levels through the end of the year. Commercial contractors said that the pace of development and backlogs remained below the year-earlier level. Contacts indicated that access to funding remained challenging and competition for projects had become more intense. Many indicated that they expected the commercial market to remain constrained in 2011.
Manufacturing and Transportation
Banking and Finance
Employment and Prices
A majority of business contacts indicated that current cost pressures were higher, citing increasing material prices and rising labor and benefit costs. Many firms also noted that they were setting aside funds for expected future increases in employment taxes and healthcare costs. However, firms remained reluctant to pass input cost increases through to consumers given intense competitive pressures. Nearly all contacts noted that markups were either near or below what they considered to be normal, reporting that increased productivity has placed some downward pressure on product prices.
Natural Resources and Agriculture
Most of the Southeast continued to experience varying degrees of prolonged drought. Reports also indicated that both the lack of rain and colder-than-average temperatures have presented challenges to Florida citrus growers. The drought has reduced the physical size of the fruit slightly, and the recent cold snaps have affected young new plantings. Supplies of both cotton and soybeans continue to be tight with strong global demand keeping prices high.