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Federal Reserve Districts

Sixth District--Atlanta

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On balance, reports from contacts for late November through December suggested overall economic conditions improved in the Sixth District. Most merchants remarked that holiday sales were slightly better than expected, while vehicle dealers noted a pickup in traffic and sales. Hospitality industry contacts observed that while current conditions remained weak, they saw some signs of improvement going into 2010. The information on home sales was mixed. The majority of Realtors reported that existing home sales were above year-ago levels, whereas new home sales and construction activity remained soft. The proportion of manufacturers reporting an increase in new orders and production moved lower in December. Most banking contacts reported that credit standards were unchanged relative to late November. There were fewer reports of layoffs in the District in December, but seasonal hiring was also described as being weaker than last year. Prices remained relatively stable for most businesses.

Consumer Spending and Tourism
The majority of District retailers indicated that holiday sales were better than expected and that discounts were not as deep as last year. Some retailers noted they had lowered prices on certain items in order to draw customers in hopes that they would also purchase other goods with higher margins. Overall, retailers continued to keep inventory levels low. The outlook among merchants was mixed, with almost half expecting a decrease in sales and a third expecting an increase in sales in the first few months of 2010. District vehicle sales remained below the level of a year earlier, but most contacts reported a pickup in year-end activity.

Tourism-related spending remained sluggish throughout the District. Industry contacts reported that hotel reservations and room rates remained below year-ago levels, but the near-term outlook was showing signs of improvement. South Florida hotels and restaurants are expected to gain from two major National Football League events coming to the area in late January and early February. Cruise lines are also reporting strong bookings for 2010, mostly because of heavy discounting.

Real Estate and Construction
Reports from District housing contacts were mixed during November and December. The majority of Realtors reported that existing home sales remained above year earlier levels, while homebuilder reports indicated that new home sales fell below year earlier levels. Realtors noted that the housing stimulus continued to boost sales. The near-term outlook among most contacts improved modestly. However, construction activity remained soft, while homebuilders continued to report difficulty in competing with bank-owned property.

Commercial construction activity remained at very low levels according to reports from contractors. More projects were put on hold, resulting in less activity expected to get underway for the early part of 2010. Commercial vacancy rates remained elevated and contacts continued to report downward pressure on rents.

Manufacturing and Transportation
After improving in November, production levels in the District's manufacturing plants contracted in December. Fewer contacts reported increased production levels and more noted cutbacks. Likewise, new orders slipped in December after rising during the previous month. With regard to finished inventory, about half of manufacturing contacts noted cutbacks in inventory in November, while in December forty percent reported reductions. Transportation contacts indicated that freight demand remained weak but had modestly improved over the past month. Railway contacts reported that regional rail shipments were flat from a year earlier with gains seen in shipments of motor vehicles, chemicals, and some metals.

Banking and Finance
Most banking contacts noted that credit standards remained relatively tight for most types of loans. Banks continued to require more documentation and allowed fewer exceptions than had been the case in recent years. A few contacts reported easing credit terms for their strongest customers. However, most reports noted a tightening of credit standards for commercial real estate loans.

Lending varied across the District, with increases noted in mortgage refinancing and loans to tax-exempt entities. Businesses also appeared to be shopping around for better loan terms, especially where more restrictions had been placed on loan renewals with the current lender. Contacts also noted an increase in credit requests from "unqualified" applicants.

Employment and Prices
Reports of layoffs continued to decelerate throughout the District in November and December. However, holiday-related hiring also appeared to be weaker than normal. Firms remained reluctant to hire permanent staff, but some noted increasing temporary hiring and an increase in hours. A few firms also noted that they do not anticipate bringing their workforce back to previous levels because of the efficiencies realized from recent layoffs. Many firms and government entities continued to enforce wage freezes.

District homebuilders continued to note stable input prices for the reporting period, while most retailers noted that retail prices remained at or slightly down from last year.

Natural Resources and Agriculture
District crude oil production continued to increase moderately in November through mid-December, with the number of rigs operating in the Gulf of Mexico up slightly from lows seen in August. Despite the increased production, crude inventories in the region continued to drop as cold weather and holiday travel boosted energy consumption. Most District areas reported excessive surplus soil moisture levels in November and December. Unusually cold temperatures in parts of Florida during early January may have impacted the state's citrus crop.

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Last update: January 13, 2010