January 16, 2008
Federal Reserve Districts
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Reports from contacts for late November through December continued to paint a mixed picture of economic activity in the Sixth District. Holiday sales were described as similar to year-ago levels, while vehicle sales remained weak. In contrast, contacts reported that tourism-related spending continued to be healthy through the end of the year. Residential real estate activity remained weak in December, although additional discounting by homebuilders appeared to help move new homes in a few areas. Manufacturing varied by industry, with defense, steel, and energy-related production reporting positive activity, while construction-related goods production remained weak. Freight traffic was below year-ago levels. Reduced credit availability and stricter lending standards for real estate loans continued to be reported among banking contacts. Demand for skilled workers was strong through the end of the year, according to most reports. Food, petrochemical and energy-related input prices continued to increase. The drought persisted in the Southeast despite much needed rainfall in late December.
Consumer Spending and Tourism
In general, auto dealers reported that late November and December vehicle sales were below year-ago levels, while inventories remained above average. Some reports noted that sales to both retail and commercial customers were off sharply for domestic brand dealers, and foreign brands were turning to fleet sales to offset weaker retail demand.
Reports concerning tourism continued to be quite positive. Florida businesses that serve winter visitors reported strong activity, and upscale hotels noted increased occupancy. Foreign arrivals boosted the state’s overall performance. European and Canadian visitor numbers were up, and Orlando International Airport was on pace for a record year for passenger traffic. Major college football games and a large convention stimulated New Orleans’ hospitality industry.
Contacts indicated that conditions in commercial markets in the District were largely unchanged from the last report, with activity described as generally flat in most areas. Developers continued to note a decline in the backlogs of construction projects.
Manufacturing and Transportation
Freight volumes in late November and December continued to weaken compared with year-ago levels. Trucking contacts noted disappointing volumes of retail and housing-related shipments. Rail companies reported lower deliveries of forest products, motor vehicles, and inter-modal cargoes. Domestic airborne shipments were off from a year earlier as well.
Banking and Finance
Employment and Prices
Food, petrochemical and energy-related input prices continued to increase, according to most reports. Firms producing fertilizer, chemicals, and plastics noted increasing input prices. Delivery costs for most products were reportedly up because of higher fuel costs. Some firms mentioned rising metal costs, especially nickel and steel. Input costs continue to increase for goods originating in Europe or Japan because of the lower value of the dollar. Local framing lumber and panel producers reported weak prices.
Agriculture and Natural Resources
Gulf Coast crude oil inventories declined further in December and reached their lowest level in three years. Production began at a large new platform, located off the coast of Louisiana. This facility is expected to produce up to 200,000 barrels of oil and 180 million cubic feet of natural gas per day during 2008.