Sixth District business contacts reported that the pace of economic activity
increased during late November and December. Most retailers conveyed that holiday
sales were up modestly from year-ago levels, while auto sales rebounded somewhat.
Travel and tourism contacts noted healthy seasonal activity, with the strongest
results coming from Florida. Reports from manufacturers were mostly positive
and capacity utilization continued to increase. According to contacts, housing
markets in many parts of the District continued at high levels, while commercial
markets noted small improvements. The demand for labor continued to increase,
and reports noted a shortage of skilled workers in some industries. Contacts
reported that prices were largely in check, although increases for building
supplies and health insurance were exceptions.
Retail contacts indicated that holiday sales were up modestly compared with
last year. Retailers in several Florida locations reported that they benefited
from strong tourism over the holidays. Intense competition among merchants led
to widespread discounting, but most contacts noted that fourth-quarter profit
margins equaled or exceeded last year's results. Electronics, jewelry and women's
apparel sold well across much of the region, while home-related products sales
were mixed. Most retail contacts anticipated modest sales growth in the first
quarter of 2005.
District car dealers were encouraged by improved sales at year-end. This improvement
was largely attributed to extensive promotional programs. Sales of District-assembled
models were mixed, with transplanted foreign brands outperforming domestic brands.
Contacts reported that District housing markets displayed strong levels of activity
during November and December. In many markets, construction and sales of new
homes posted gains, bringing them close to year-ago levels. New housing construction
continued to pick up in Florida following delays caused by the hurricanes. Both
builders and Realtors in Florida noted shortages of homes for sale. Nonresidential
construction remained at low levels, but there were scattered reports of increasing
industrial development. District office markets continued to recover very slowly.
Manufacturing and Transportation
Reports from the factory sector were generally positive and most contacts noted
increased utilization of operating capacity in late November and December. Manufacturers
of construction materials and steel were operating at especially high levels
of capacity because of strong demand. Contacts noted increased output for pulp
and paper producers, and reports from carpet producers and the defense sector
were positive as well. Less positively, a computer circuit board manufacturer
plans to cut 525 jobs in response to strong competition from Asian producers
and a machine tool firm reported a decline in new orders. District trucking
contacts continued to report increasing demand for freight services at year-end.
In addition, the ports of Savannah, Brunswick and Jacksonville posted double-digit
gains in both inbound and outbound shipping and Miami and Atlanta airport cargo
tonnage was higher than year-ago levels.
Tourism and Business Travel
Industry reports suggest that the District's tourism industry performed well
in late November and December, and the outlook remained positive for the rest
of the winter season. Increased attendance at Florida attractions was reportedly
boosted by a rise in foreign visits. Central Florida theme parks were filled
to capacity and restaurants and hotels have increased hiring. Repairs to tourist
facilities in hurricane-damaged areas continued. In Nashville, hotel room tax
collections were running more than 8 percent ahead of 2003 and bookings suggested
the strongest December in four years. Some District signs have also recently
emerged of improvement in the business meeting and convention sector. Bookings
of the exhibit space at downtown Atlanta's Georgia World Congress Center are
up notably from a year ago.
Financial sector reports were mostly positive in late November and December.
Consumer loan demand remained steady at strong levels and delinquency rates
remained low. Commercial loan demand improved marginally but remained at low
levels overall. Asset quality remained strong across most of the District, and
insurance proceeds and federal loans boosted deposit levels in parts of Florida.
Reports indicated that venture capital spending was increasing in some areas.
Employment and Prices
According to contacts, labor markets improved in late November and December.
Several manufacturers reported that they were adding workers and some reported
difficulty finding qualified staff. Commercial and residential building contractors
reported that subcontractors, such as carpenters and roofers, were especially
hard to find. Contacts in some parts of the District also reported that demand
for workers in technology service industries has improved.
Rising building supply and healthcare costs continued to be widely reported.
According to most reports, price increases for building materials were being
passed along to homebuyers. Several business contacts noted that a larger share
of the increase in health insurance costs was being passed along to employees
than a year ago. Fuel surcharges continued to be used by transportation firms.
Weather patterns fluctuated markedly in late November and December, but no major
impact on District crops was reported.