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, 2007

Federal Reserve Districts

Sixth District--Atlanta

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Reports from contacts for October through mid-November continued to paint a mixed picture of economic activity in the Sixth District. Retail reports suggested that year-over-year sales growth had moderated somewhat, and vehicle sales fell short of expectations. In contrast, tourism reports were generally positive. According to homebuilders and Realtors, new and existing home sales remained well below year-ago levels in October and the pace of new home construction continued to decline. The inventory of homes for sale remained high across much of the District. Manufacturing reports varied by sector; the pace of production slowed for most manufacturers linked to residential housing, but remained strong for firms connected to energy, medical, and defense-related industries. Banking contacts noted moderating loan demand and higher foreclosure and mortgage delinquency rates in many areas. Labor markets remained tight in parts of the District, but there were reports of increased layoffs in construction and some housing services industries. Price pressures were centered on energy and food products. Exceptional drought conditions in areas of Alabama, Georgia, and Tennessee continued to hamper crop production.

Consumer Spending and Tourism
Reports from District retail contacts indicated that year-over-year sales growth had moderated somewhat since September. The majority of contacts reported that inventories were up from a year ago, and several contacts stated that inventories were higher than desired. Looking ahead, retailers remained cautiously optimistic, with most anticipating positive year-over-year sales growth over the next several months. October vehicle sales fell short of expectations for most regional contacts. Domestic-brand sales continued to be soft, while foreign-brand dealers reported weaker retail sales than in the last report. Vehicle inventories were generally higher than expected.

Tourism reports were largely positive. Foreign travel has boosted leisure and hospitality activity in Florida, and industry contacts expect Canadian travel to the Sunshine State to increase to record numbers this winter because of appreciation in the Canadian dollar. Hotel and resort occupancies in South Florida increased, in part because of increased business from Europe and Latin America. A North Florida hotel contact said that the pace of bookings for next year is solid. Gaming revenue remained strong along the Mississippi Gulf Coast. All tourism industry contacts indicated that increasing gasoline prices were a significant risk factor for the outlook.

Real Estate
Homebuilders and Realtors reported that new and existing home sales remained well below year-ago levels in October and inventories remained at high levels across much of the District. In addition, the pace of new home construction continued to decline sharply and contacts noted intensifying downward pressure on new and existing home prices. The majority of contacts anticipate weakness in home sales will persist, although some builders remained optimistic that new home sales will improve over the next several months.

October reports on commercial construction indicated that activity was flat to down slightly compared with a year ago. Most Florida contacts continued to report fewer projects in the pipeline compared with last year at this time, while outside of Florida there were scattered reports of declining backlogs. Several contacts noted that high insurance costs remained a stumbling block for commercial development along the Gulf Coast.

Manufacturing and Transportation
Reports indicated that the pace of production slowed for most manufacturers linked to residential housing. Contacts supplying building materials for residential housing markets reported that demand remained weak and inventories were high. A concrete company producing material for the multi-family housing sector noted that production was down significantly. More positively, manufacturers producing goods for the defense, medical, and energy industries reported strong activity. In addition, firms producing for the export market noted improved business and a positive outlook. Freight service firms reported lower shipments of housing-related construction goods and autos.

Banking and Finance
Banking contacts reported rising mortgage delinquency and higher levels of foreclosure. Institutions noted that lending standards and terms had tightened for consumer and C&I loans. Commercial loan demand also appeared to be softer, according to some reports. Several contacts reported that the pipeline of new development projects was lower than earlier in the year, with the exception of medical and public sector projects.

Employment and Prices
Labor market conditions remained generally tight in most parts of the District. Several employers noted a continuing shortage of skilled labor. Labor costs in southeastern Louisiana are reportedly starting to climb because of increased demand for labor in the refinery and petrochemical industries. Contacts reported a lower demand for workers in several housing-related activities such as construction, building material and fixture manufacturing, the sale of homes, and landscape services.

Price reports were mixed. Weak housing markets continued to adversely affect District suppliers of building materials and fixtures. Demand for milled lumber, for example, is weak and prices have declined further. In contrast, some food prices have risen substantially. According to one contact, there have been double-digit increases in prices received for flour, sugar, and soy. Prices are reportedly also increasing for milk and corn products.

Agriculture and Natural Resources
Regional drought conditions continued to trouble the District's farming sector. Crop production and yields were off sharply for most growing areas except Louisiana. Meanwhile, greenhouse and nursery growers were challenged by the lower demand caused by slower new home construction and higher operating costs. One large regional nursery has been forced into bankruptcy because of reduced demand associated with the drought. Citrus production estimates are above last year's weak crop that was affected by the hangover from the 2004 and 2005 hurricanes and disease-related losses. However, dry weather predictions and scarce water supply from two major river basins could seriously limit the near-term outlook for citrus and other Florida crops. Higher oil prices have led to an increase in exploration as well as plans to expand refinery operations in the District.

Return to topReturn to top

Previous Richmond Chicago Next

Home | Monetary Policy | 2007 calendar
Accessibility | Contact Us
Last update: November 28, 2007