July 25, 2007
Federal Reserve Districts
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Reports from District contacts painted a mixed picture of the District economy during June and early July. In the consumer sector, retail sales were uneven and vehicle sales were generally lackluster, whereas tourism activity was positive. Weak home sales and high inventory levels were leading to further reductions in construction. For the most part, the pace of nonresidential development remained positive. Manufacturing activity was generally stable, except for continued declines in sectors related to housing construction. Freight industry contacts reported weak demand from the housing construction and auto sectors. Labor markets remained tight, particularly for specialized occupations in healthcare and education, and in skilled trades. Price reports varied. Some building contacts reported lower timber costs, while others commented on rising fuel costs. Despite recent rains, the drought has severely limited the outlook of District crops and livestock.
Consumer Spending and Tourism
District vehicle sales were mostly lackluster. Contacts reported that foreign brands outperformed domestic brands, and this was attributed to stronger demand for fuel-efficient models. However, some import distributors reported that the pace of vehicle sales in the District lagged behind other regions. Another contact noted that new vehicle registrations were much lower than last year, with Florida having the weakest performance.
Most reports indicated that tourism activity was holding up better than they had expected given high gasoline prices. Summer visitor numbers were described as good by contacts at north Florida hotels, and were stable in Miami and along the Alabama coast. With the Hard Rock Casino opening in July, and the recently completed addition to the Island View, the Mississippi Gulf Coast tourism market continues to recover. However, some New Orleans contacts noted that convention attendance has been lower than expected.
Reports from District commercial contractors indicated that the pace of non-residential development in the second quarter was flat to slightly down in Florida compared with a year ago, and increasing moderately elsewhere. Overall, most contractors outside Florida anticipate that activity will exceed year-ago levels for the remainder of the year.
Manufacturing and Transportation
Several trucking companies that service building suppliers reported lower freight demand and less ability to pass on cost increases. Through mid-June, freight traffic at major regional railroads declined because of lower shipments of forest products and motor vehicles.
Banking and Finance
Employment and Prices
Residential and commercial builders noted less upward pressure on material inputs. Several contacts noted that competition for business was causing them to continue to absorb increases in the cost of labor, energy, as well as business and health insurance.
Agriculture and Natural Resources
Deep water drilling activity remains high in the Gulf of Mexico, continuing to push up demand for rigs, equipment, and personnel. Refinery utilization rates in the Louisiana Gulf Coast area were maintained at high levels.