April 13, 2011
Federal Reserve Districts
|Skip to content
Sixth District business contacts described economic activity as advancing modestly from mid-February through March. Retailers cited that consumer spending improved while auto dealers reported strong sales growth. Tourism activity remained positive as occupancy rates and air travel mostly increased. Residential brokers and builders indicated that sales growth of new and existing homes were mixed, but generally remained weak, while commercial contractors mentioned improving conditions as development increased slightly. District manufacturers experienced increasing levels of new orders and production. Transportation firms noted modest advances in shipments and tonnage. Banking contacts reported soft but improving loan demand. Labor markets continued to recover at a gradual pace. Cost pressures grew for most District firms, but the ability to pass through price increases continued to vary by industry.
Consumer Spending and Tourism
Hotel occupancy rates rose on a year-over-year basis in several of the District's major markets, while convention bookings were flat compared with last year. Restaurant contact reports were mixed and many cited concerns over the rising costs of food products. Airline carriers indicated an increase in both business and leisure travel. Overall, the outlook for tourism remained upbeat.
Real Estate and Construction
District residential brokers indicated that existing home sales growth softened somewhat in February and March, and were generally similar to year-ago levels. However, Florida brokers were more upbeat with the majority noting sales gains on a year-over-year basis, which were largely driven by sales of distressed homes. Brokers elsewhere in the region remarked that sales remained below year-earlier levels and were slightly weaker than in our last report. District brokers stated that home inventories eased on a year-over-year basis and that the number and speed of foreclosures coming into the market had slowed. Several contacts mentioned greater demand for rental property. The outlook for sales growth continued to improve, largely driven by positive reports from Florida brokers.
Nonresidential construction activity remained at low levels during February and March. However, the majority of contractors indicated that the pace of commercial development was flat to slightly up compared with a year earlier, which is an improvement from our previous report. Backlogs declined on a year-over-year basis. Contacts noted that material prices were on the rise while competition for available projects remained aggressive. Most contractors anticipate activity to remain flat to slightly below last year's level.
District commercial brokers reported that markets continued to stabilize. Vacancy rates remained relatively unchanged from the end of last year and declining rents were noticed across much of the District. Commercial brokers anticipate a slow recovery.
Manufacturing and Transportation
Transportation contacts noted that shipments and tonnage continued to experience modest increases since the last report. Most firms also cited that they have not yet experienced major disruptions in the supply chain from the Japan disaster, but several are anticipating some temporary interruptions – most notably in the auto and IT sectors.
Banking and Finance
Employment and Prices
Firms' expectations for unit cost increases over the next year continued to rise, with material costs and employee salaries and benefits cited as sources of potential cost pressures. Reports of price pass-through were mixed across the District and varied based on industry and the presence of competitive pressures. For example, many retailers noted that strong competition was limiting their ability to raise prices. Homebuilders said that they have been unable to pass through material cost increases because of persistent downward pressure on home prices. However, many manufacturers were more successful in increasing prices to their customers.
Natural Resources and Agriculture
While rainfall totals in some areas have improved since the previous report, much of the District experienced varying levels of drought. Contacts noted that prices of fuel and feed continued to put pressure on margins, but prices for many of the District's agriculture products remained strong, particularly cotton, soybeans, and beef. Reports indicated that continued strong global demand has contributed to elevated prices for some farm acreage in the District.