September 9, 2009
Federal Reserve Districts
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Sixth District business contacts in several industries reported signs of stabilization in economic activity through August. Retail merchandise and tourism-related spending was described as being little-changed. However, auto industry contacts cited a sharp increase in sales as a result of the cash-for-clunkers program. Reports from real estate contacts indicated that the pace of decline in home sales continued to moderate in most areas compared with the same time a year earlier, while Florida Realtors noted continued sales gains from very low levels. The inventory of unsold homes remains elevated, in part because of the continuing supply of foreclosed properties, and this is said to be keeping downward pressure on home prices. Commercial real estate activity softened further as vacancy rates rose, rents declined, and more projects were delayed. Manufacturing activity continued to improve as reports of new orders and production levels increased. Banking contacts reported that credit availability remained tight. The pace of layoffs broadly slowed, but few contacts outside of temporary staffing noted any plans to expand payrolls in the near term. Prices remained generally stable. Most business contacts reported that they had no plans to hike prices or raise wages in the current environment.
Consumer Spending and Tourism
Auto dealers from across the District indicated that the cash-for-clunkers program significantly helped stimulate traffic and sales from late July to mid-August. Many dealerships reported that the demand for fuel-efficient vehicles outpaced availability. Many also noted concern over the sustainability of the recent pace of sales now that the cash-for-clunkers program has ended.
According to most hospitality industry contacts, travel-related spending remained sluggish in most parts of the region. Hotel reservations were down for both leisure and business-related travel, with bookings supported by aggressive discounting. Most industry contacts reported lower revenues, and reduced profit margins. They generally expect subdued activity to persist over the next few months.
Real Estate and Construction
Commercial real estate activity continued to trend lower since last reported. Most contacts characterized activity as weakening. Vacancy rates increased further, with greater downward pressure on rents noted among contacts. Developers also continued to report fewer projects in the pipeline overall, and delays in existing work. However, contacts in Alabama and the Mississippi coast did note some projects that had been on hold have recently moved ahead. Most contractors continued to anticipate that the level of commercial construction will continue to decline into 2010. Similarly, commercial Realtors anticipate continuing weak demand for existing space--particularly in the office sector.
Manufacturing and Transportation
Trucking contacts reported that most regional companies are continuing to experience weak freight demand, lower revenues, and excess trucking capacity. However, year-over-year declines in rail shipments of metal ores, scrap metals, and chemicals were said to have moderated in July and early August.
Banking and Finance
Employment and Prices
Construction and manufacturing firms reported that raw material prices had generally moderated by mid-August after having increased in late spring. Most business contacts also noted that they were unsuccessful in attempts to pass on any increased input costs to their customers. District retailers reported that retail prices remained stable relative to year-earlier levels.
Natural Resources and Agriculture
Most District farms benefited from precipitation that improved soil moisture conditions. However, weak domestic and international demand continued to trouble the near-term outlook for the region's cotton and poultry industries.