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The Southeastern economy continues to expand moderately in midwinter, according to most contacts. Merchants report satisfactory sales and inventory accumulations, but they are cautious regarding spring sales and anticipate only marginal increases from a year ago. Contacts report increasing manufacturing activity for most sectors, although weakness persists for some apparel and textile producers. Tourism and convention activity continues at high rates, and officials report strong spring bookings. Reports on single-family home sales remain mixed, while commercial real estate markets are improving, and new development is accelerating. Bankers note moderate loan demand with quality improvements reported throughout the District. Although low unemployment rates in parts of the District are making it difficult for some employers to find qualified workers, wage increases have been relatively stable, according to most contacts. A late January freeze damaged crops in Florida, but the citrus crop was mostly spared.
According to most District retailers, sales during January were up significantly, while up only slightly during the early part of February on a year-over-year basis. The majority of retailers reported that recent sales have met their expectations, and that inventories are on target. Apparel sales continued to be extremely strong; cosmetics and home-related product sales also made strong showings throughout most of the District. Looking forward to spring sales, most retailers remain cautious, anticipating only slight increases over last year.
According to real estate contacts, single-family home sales were uneven in the District on a year-over-year basis in January and early February. Construction was generally flat. A majority of real estate contacts report that inventories of unsold homes are adequate for expected sales. A notable number of Realtors said that inventories were too low in their area of the region, but few Realtors reported overbuilding. Realtors expect an increase in first and second quarter homes sales compared with a year ago, while builders anticipate home building will remain close to year-ago levels.
Contacts generally report that commercial real estate markets continue to improve. Declining vacancy rates and higher rental rates are propelling new industrial, office, and retail development in much of the District. Although most commercial projects are build-to-suit, a growing number of speculative projects are underway and more are anticipated this year. Overall, the multifamily sector remains healthy.
Manufacturing appears varied but generally positive at this time, according to factory contacts. Automotive suppliers are expanding and their exports are increasing, resulting in overtime for employees. The lumber industry is picking up in parts of the District, and orders are increasing for machinery producers and food processors. Job rolls are expanding in Louisianaís energy extraction industries where suppliers say foreign sales have been especially strong. Shipbuilders in Mississippi report new contracts, and development of industrial projects continues at a rapid pace in northern Tennessee. Less positively, paper company contacts report no significant diminution of an extended wood pulp glut. Further closings of textile and apparel plants in response to foreign competition continue to be reported for parts of the region.
Tourism and Business Travel
The tourism and convention sector posts mostly favorable reports. Reservation trends are strong for south Florida resorts, hotels, and motels, with advance bookings up from a year ago. Tourism is also off to a good start in central Florida this year, with increasing airline passenger growth and packed theme parks. Convention activity is picking up in parts of the region; Huntsville recently hosted the largest convention in its history, and the Supershow sports show in Atlanta attracted about 110,000 visitors. Less positively, gaming revenues for some Mississippi casinos are down slightly from a year ago as a result of new capacity coming online. The Super Bowl was a success in New Orleans, filling hotels to capacity; in contrast, preliminary reports suggest that Mardi Gras didnít attract as many visitors as a year ago.
Most banking contacts continue to report a moderate level of overall loan demand. Consumer loan demand varied across the region, while commercial lending remained flat in the last few weeks. Mortgage demand is accelerating slightly over Januaryís levels but is flat compared with last year. Loan quality continues to improve across the District.
Wages and Prices
Contacts report that current wage increases appear to be moderate. However, reports of worker shortages for specific industries continue. In Louisiana, contacts note shortages of crews needed to work on offshore drilling rigs. Upper management and information systems personnel remain in high demand in parts of the region, although the overall paucity of well-qualified candidates has reportedly eased somewhat compared with several months ago. Some firms cite low unemployment rates as making it difficult to expand their operations. Contacts also note higher current prices for materials and finished goods; however, they look for price stability over the longer term.
The late January freeze severely damaged some crops in Florida. Hardest hit was Dade County where it is estimated that losses to the winter vegetable and tropical fruit crops could amount to $93 million. Total losses across the state could reach $250 million. The citrus crop was not as adversely affected by the freeze.