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Federal Reserve Districts

Sixth District - Atlanta

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The southeastern economy posted mixed growth into fall, and the outlook remains mostly upbeat. Merchants' sales have, on balance, met expectations, and contacts anticipate that fourth quarter sales will outpace those of a year ago. Residential construction and sales were nearly unchanged from the previous month, while commercial building was ahead of last year in most markets. Advance bookings for the tourism and hospitality sector are disappointing in parts of the District. Overall manufacturing activity increased recently, but weakness persists in certain sectors. Bankers report mostly strong loan demand. Tight labor markets continue to plague District employers, but there are few reports of accelerating wage pressures. Prices remain stable, with a few exceptions.

Consumer Spending
Sales results during September and early October have been decidedly mixed as about half the retailers contacted said sales were down from a year ago, while the remainder experienced increases. However, most merchants said that recent sales have met their expectations and inventories are balanced. The strongest sellers recently have been women's and children's apparel, while home-related product sales have varied across the region, and men's apparel sales have made a poor showing. Looking to the fourth quarter, a majority of retailers anticipate sales will be up slightly compared with last year.

The pace of single-family construction in October was similar to September, while new home sales weakened. Reports indicate that construction levels are especially weak in Louisiana and Mississippi. Realtors indicate that new and existing home sales in September and October have been mixed across the region with a slight improvement noted in October. The majority of contacts said that home inventories are currently balanced. Looking forward, most builders expect construction levels to be similar to, or slightly below, last year's levels through the end of the year. The pace of District multifamily construction remains similar to our last report, up modestly from a year ago.

The pace of District nonresidential construction is slightly ahead of a year ago but varied across the different states in the District. Contacts in Florida, Georgia, and Tennessee report that construction continues to slow but remains above year-ago levels. In Louisiana, construction activity is similar to last year's level, while in Alabama and Mississippi construction continues at below year-ago levels. Vacancy rates are on the rise in the Atlanta office and industrial markets as well as the Orlando office market.

Manufacturing activity increased moderately since the last Beigebook. Most contacts noted increases in production and new orders; reports pertaining to the near-term factory outlook were also positive. New military weapons contracts are expected to boost employment rolls in Mississippi and Alabama. Shipyards in Louisiana are reportedly operating at 100 percent capacity because of large long-term contracts. Stabilizing paper costs are helping District printers, but there is concern about business loss to electronic media. Less positively, the factory workweek and shipments are declining for an appliance producer, perhaps indicating some slowing from national residential housing markets. Several contacts said that hurricanes caused lost factory production days in the District. However, demand increased for lumber and wood products because of storm damage repair.

Tourism and Business Travel
The outlook for the tourism and hospitality industry, while good, is a little less positive than before. Some south Florida resort and hotel owners are disappointed with advance bookings for the upcoming tourist season and are pessimistic about exceeding last year's results, speculating that some tourists are reluctant to make plans until after Y2K. Bookings for the "Turn-of-the-Year" are said to be disappointing. In Atlanta, 1999 is reportedly shaping up to be the best year the city has ever had for conventions, but bookings are down for the year 2000 partly because of competition from other cities with new or expanded facilities. Gaming revenues along the Mississippi Gulf Coast are at record levels and are expected to outpace those of a year ago by double-digits.

Bankers report that overall loan demand and lending remains strong throughout the Southeast. Consumer and automobile lending remain very strong, commercial lending has moderated, and mortgage and refinancing loan demand are subdued. Banking contacts around the District report that credit quality is good, and bankruptcies continue to gradually decline; however, there were reports that some bankers are showing an increasing willingness to accept higher risks in making loans and are making some concessions on loans and borrower qualifications.

Wages and Prices
Contacts continue to note problems with tight labor markets, but there are few reports of accelerating wage pressures. One contact reports that the use of excessive overtime to make up for labor shortages is causing morale and productivity problems. Competition for new and replacement employees is reportedly intense in Miami, Jacksonville, New Orleans, Atlanta, and Nashville. Skilled construction workers, nurses, and information technology professionals remain in especially high demand.

Contacts expect no significant changes in the prices of inputs or outputs for the near term with only a few exceptions. Health insurance premiums and pharmaceuticals prices are expected to continue on an upward trend. Some contacts say that the cost of higher oil prices is cutting into profits more than impacting the pricing of goods and services because of the competitive marketplace. An "abundance of work" is keeping construction materials prices high in parts of the District.

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Last update: November 3, 1999