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Federal Reserve Districts

Sixth District--Atlanta

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Full report

Reports from business contacts during January and the early part of February painted a mixed picture of economic activity for the Sixth District. While most retail contacts noted a larger than expected post-holiday decrease in traffic and sales, tourism-related spending appeared to have increased as a result of several high profile events. Residential real estate contacts indicated that both new and existing home sales softened, but generally remained above weak levels from a year ago. Commercial contractors continued to describe activity as weak. District manufacturers noted an improvement in new orders and the decline in production slowed. Banking contacts continued to note weakness in loan demand. Overall, businesses reported that labor demand remained subdued. However, temporary help agencies have noted a steady increase in job orders since the beginning of the year. Some manufacturing contacts reported an increase in input prices, but retail contacts suggested that they had very little pricing power.

Consumer Spending and Tourism
Most District retailers indicated that traffic and sales were lower than expected. Merchants reported that they continued to keep inventories at low levels. The outlook among retailers was mixed, with almost half of those contacted noting that they expect an increase in sales over the next few months. Despite the higher sales expectations, retailers did not indicate that they planned to make significant adjustments to inventories. District vehicle sales remained weak in January despite gains reported in some light vehicle segments.

Tourism-related spending strengthened throughout the District. Miami, in particular, experienced strong demand for hotel bookings related to the Pro Bowl and the Super Bowl. Mardi Gras, which took place in mid-February in New Orleans, is estimated to have had the highest number of attendees since 2005. Cruise industry sources noted that onboard spending increased in early 2010. The overall outlook among hospitality contacts improved since the last report.

Real Estate and Construction
According to reports from District homebuilders, new home sales softened somewhat across the region. Weakness was most pronounced among Georgia homebuilders. The majority continued to report that construction activity declined on a year-over-year basis. Most said that unsold home inventory was below year-ago levels, while reports indicated that new home inventory continued to decline on a month-to-month basis as well. The majority of builders continued to note year-over-year declines in home prices, but more than two-thirds of respondents said prices were unchanged from December. Overall, the outlook for home sales improved slightly, while expected construction activity softened a bit.

Reports from Realtors also indicated that existing home sales growth softened during January. Some noted that weather had been a deterrent to sales. Realtors indicated that high-end home sales growth remained weak but continued to improve, while low to mid-priced home sales growth softened. On a year-over-year basis, existing home inventories were mixed; however, reports indicated that unsold inventory increased from December. Most contacts continued to report year-over-year declines in home prices and more than half reported that prices had declined from December. The outlook remains positive but softened somewhat from December.

Commercial construction across the District remained at low levels during the reporting period. Most contractors reported that activity was even with fourth quarter 2009, while a few reported continued weakness. A little more than half said that backlogs were similar to fourth-quarter levels but were below year-ago levels. Most reported that demand for new construction remained very weak. Looking ahead, the majority of contacts anticipate commercial construction activity for the remainder of the year to be largely flat.

Manufacturing and Transportation
Recent reports from Sixth District manufacturers revealed that new orders rose, while the decline in production moderated. Over half of the manufacturers contacted expect production levels to rise in the coming months. With regard to finished inventory, contacts continued to report ongoing reductions.

Transportation contacts reported that freight demand modestly improved in early 2010. Regional rail loadings in January and early February were above year-ago levels, with autos, chemicals, metals, and some construction-related shipments posting noticeable gains.

Banking and Finance
Overall, the level of bank lending continued to contract as credit conditions remained relatively tight. Banks reported having ample liquidity, but remained cautious of reducing cash reserves. Weak loan demand, particularly related to business expansion, continued to be noted by banking contacts throughout the region. Contacts also noted that stricter loan terms have effectively reduced the pool of qualified loan applications.

Employment and Prices
Temporary help agencies continued to report an increase in job orders in January and early February. However, unemployment remains high across the District and job creation remained tepid. Businesses continued to describe attempts to do more with less, such as combining the duties of several jobs into one.

District manufacturing contacts indicated that input prices were up compared with a year ago, citing rising commodity prices as a primary factor. District retailers indicated that they had little pricing power and were wary of trying to pass input price increases through to consumers.

Natural Resources and Agriculture
Crude oil production in the District moderated slightly in January and early February, though output remained above the lows seen in August 2009. Industry contacts noted that refineries in the region continued to scale back processing of distillate fuel oil, helping to deplete historically elevated stocks. Recent wet weather and cold temperatures have negatively affected winter crops in Alabama and Georgia and limited farm work in most areas of the District. Meanwhile, Florida's farmers reported minor losses of vegetable, sugarcane, and citrus crops as a result of a winter freeze.

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Last update: March 3, 2010