The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed November 28, 2001

Federal Reserve Districts

Sixth District - Atlanta

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

District contacts indicated that economic conditions in the Southeast continued to be weak despite record auto sales in October and the continued resilience of housing markets. Retailers reported that sales growth through mid-November had moderated after a strong rebound in October. The single-family housing market remained solid overall, whereas commercial real estate markets weakened further. Manufacturing production declined and plant closings and layoff announcements continued. Tourist activity rebounded from post-attack lows but fell short of year-ago levels. Few signs of inflation were apparent apart from increased healthcare and insurance costs.

Retail Spending
According to District retailers, sales growth improved considerably in October but then pulled back slightly in early November. Discount retailers continued to fare much better than their department and specialty store counterparts. About one-half of the retailers contacted said that recent sales were below expectations and inventories were high. By most accounts, deep discounting and promotions have become the norm. The outlook for the holiday season amongst retailers remained mixed. Discount merchants' expected modest sales improvements and upscale retailers anticipated flat to lower sales compared with last year.

Auto sales increased to record levels in the District in response to the zero percent financing and extended warranty incentives offered by several manufacturers. Industry contacts reported dramatic gains in October sales compared with a year ago, far exceeding their sales objectives and sharply reducing inventory levels. The pace of sales slowed in early November as the financing incentives narrowed in scope. Record numbers of trade-ins and rental car fleet reductions have caused used car inventories to swell across the District leading to sharp declines in used car prices.

Real Estate and Construction
The single-family housing market remained quite solid through early November with the most positive reports coming from Florida. The demand for low- to mid-priced homes was steady across the District, whereas the demand for high-priced homes softened in markets such as Atlanta and Nashville. Most contacts expected that home sales and new home construction would moderate in the fourth quarter. Office and industrial real estate markets continued to weaken in the face of higher vacancy rates and additional sublease space. Rental rates declined in several markets. Contacts reported that a pickup in commercial construction was not expected until the second half of next year.

The manufacturing sector continued to trim production and payrolls in October and November. The investment strategies of manufacturers remained conservative, and only essential capital expenditures were undertaken. Many businesses have increased expenditures on security equipment and security personnel. Manufacturers announced layoffs and production cuts in the electronics, automobile, shipbuilding, tire, and building products industries. In one positive development, the U.S. Department of Defense awarded the Joint Strike Fighter plane production to Lockheed Martin, securing jobs at the company's large Marietta, Georgia, facility.

Tourism and Business Travel
Contacts reported that the District's hospitality and tourism sector continued to reel from the slowing economy and the impact of the terrorist attacks on air travel. Hotel, car rental agencies, airlines, and cruise lines in central and south Florida have experienced some improvement in business from the record lows following the September 11th attacks but remained well-below normal levels for October and November. A major car rental firm based in south Florida filed for Chapter 11 protection because of a sharp decline in activity. The opening of a large hotel in Orlando was postponed as attendance at local tourist attractions waned. The travel slowdown also affected hotels in Atlanta and along the Mississippi Gulf Coast. Florida tourism officials are hoping that sales incentives, lower gas prices, and an early, cold winter in the North will improve the state's tourism numbers. Reservations in Florida for the December through April period were on an increasing trend through mid-November.

Commercial loan demand softened further in the Sixth District according to reports, but mortgage refinancing remained brisk in early November. Deposit growth was sluggish in some parts of the region, and there was some tightening of credit standards for loans secured by commercial real estate. There has been no sign of improvement in the District's venture capital markets.

Wages and Prices
According to reports, wage pressures were subdued in the District. However, hospitals are operating at high capacity and are aggressively hiring nurses, pharmacists, and other health care workers. Some double-digit percentage increases in health care charges and insurance premiums were reported while home price increases moderated. Large price declines were reported for hotel accommodation and other travel-related services. In addition, energy prices decreased sharply across the District, leading to a reduction in gas and oil activity in Louisiana.

The decrease in world demand for textile products and high levels of domestic production has led to some of the lowest cotton prices in the past 25 years. Cotton is the largest cash crop in Mississippi, Louisiana and Georgia. A lower than expected forecast for this season's Florida citrus crop, together with reported disease problems in Brazil, was good news to local citrus growers who had been facing low prices and strong competition from Brazilian producers.

Return to topReturn to top

Previous Richmond Chicago Next

Home | Monetary Policy | 2001 calendar
To comment on this site, please fill out our feedback form.
Last update: November 28, 2001