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Federal Reserve Districts

Sixth District--Atlanta

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Summary: Reports from the Sixth District indicated that the pace of economic growth was stable during October and early November. Except for the autos sector, retailers were upbeat about October sales and holiday prospects. District residential housing markets continued to post steady growth, while commercial real estate markets noted small improvements. The tourism industry reported a rise in visitors and a positive outlook for the winter season. Reports on the financial sector varied. Small improvements were noted in the industrial sector as manufacturers continued to proceed cautiously. Employers remained reluctant to add employees until business had firmed. Prices were characterized as stable overall.

Consumer Spending: According to District merchants, sales growth during October was generally positive. Retailers' expectations for holiday sales were more upbeat than in earlier reports, and some stores increased their orders. Most retailers agreed that inventories were better managed than at this time last year. However, discounting remained widespread and reports on early November sales were mixed, attributed to unseasonably warm weather.

October sales were disappointing, according to District auto dealers. Contacts noted that, as inventories of highly promoted 2003 vehicles dwindled, bargain-seeking buyers were hesitant to purchase new model cars and trucks that often carried less generous incentives. However, several dealers were encouraged by recent strong floor traffic. Reports on used car sales were mixed, with some car dealers continuing to struggle with weak demand and others reporting lower inventory and greater participation at regional auctions.

Real Estate: District single-family housing markets were generally stable. Homebuilders continued to report that new home construction and sales were flat to slightly up, while most Realtors said that October home sales were near year-ago levels but that there was some weakening in early November. Contacts anticipate home sales and construction will remain steady through year-end; builders expect an increase in new home construction during the first quarter. Nonresidential construction remained weak in October, but contacts noted that District retailers have begun to move forward with expansion and renovation plans. Office and industrial space continued to recover slowly, with small improvements in leasing reported.

Manufacturing: Manufacturing activity improved in some sectors, but few firms built inventories or added to permanent employment rolls. Some managers continued to note excess capacity and underutilized employees. An apparel producer pared back inventories and laid off workers because it missed revenue targets. More positively, the lumber business was booming, reportedly because of temporary supply constraints and ongoing strong demand. Inventories were reportedly difficult to replenish in the roofing business because product was moving so quickly. A military contractor noted increases in new orders. Expansions at vehicle production facilities were well underway, with another round of hiring occurring.

Tourism and Business Travel: Improvement in the District's tourism and hospitality industry continued during October, according to most reports. Traffic at amusement parks and tourist attractions in central Florida rose, stimulated by deals and discounts. Tax collections in central Florida improved, and passenger traffic through Orlando International Airport increased by nearly 3 percent in the fiscal year that ended in September compared with 2002. Expectations for the winter tourist season are reportedly high in south Florida, and advance bookings are encouraging. Miami's convention industry improved in October, and the cruise industry was reportedly "going strong" and hiring workers.

Banking and Finance: Reports from the financial sector were mixed. Residential mortgage refinancing activity slowed considerably across the District. Bankers reported that past dues increased in home mortgage portfolios, but problem loans and past dues remained manageable overall. Deposit growth held steady or improved in most of the region compared with last year. One contact noted that venture capital firms were beginning to evaluate start-up business prospects. Commercial loan demand, however, remained weak overall.

Transportation: District trucking contacts noted an upward trend in freight businesses during October and early November. Smaller trucking companies that had previously fought bankruptcy reported stronger demand and higher margins, with some upgrading their fleets. Despite sluggish growth in manufacturing, transportation business was up overall because of strong demand for building materials and seasonal freight, according to most contacts.

Wages and Prices: Most reports indicated that most firms remained reluctant to add full time permanent employees. Businesses want stable orders before they will hire, according to one contact. Some firms, particularly manufacturers, continued to cut jobs through technological improvements and increased productivity. Companies also continued to rely on outsourcing and temp agencies to fill labor slots because of high benefit costs.

Prices remained stable, with a few exceptions. Firms continued to note increasing health care costs; however, one report indicated that the rise in health care costs is likely to slow somewhat next year. Lower fuel prices aided District transporters.

Agriculture: Most District farmers benefited from favorable weather patterns and higher prices in October. Soil conditions were good, and dry weather facilitated fieldwork activities. Market reports were positive from cotton, peanut, and citrus growers in particular.

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Last update: November 26, 2003