WASHINGTON (MNI) – The following is the the text of the Federal
Reserve’s Beige Book survey Sixth District summary, published Wednesday:
Summary
Business contacts around the District described economic activity
as improving in March and early April. Retailers saw an increase in
traffic and sales and their outlook improved. Auto sales increased on a
year-over-year basis, while revenues in the Districts tourism segment
were described as stable. Residential real estate contacts indicated
that both new and existing home sales improved and were above weak
levels from a year earlier. Commercial contractors, on the other hand,
continued to cite weakness in nonresidential construction activity.
District manufacturers noted further improvement in new orders and
production. The flow of bank credit to businesses remained subdued.
Permanent hiring remained weak. However, temporary help agencies noted
an increase in job orders. Manufacturers and homebuilders reported
increases in input prices but indicated that they were not able to pass
them through to consumers.
Consumer Spending and Tourism
District merchants indicated an improvement in traffic and sales in
March. Retailers reported that despite the uptick in sales, they
continued to keep inventory levels lower than normal; several merchants
related that they preferred risking lost sales to having excess
inventories. The outlook among retail contacts also improved with the
majority expecting sales to increase over the next couple of months.
District vehicle sales increased from a year ago, largely driven by an
expansion in fleet sales deferred from last year. Tourism-related
spending was described as stable in most parts of the District. Contacts
in Atlanta, Miami, Nashville, New Orleans, Orlando, and Tampa all
reported hotel occupancy rates above the national average from February
to March. Cruise lines noted increased demand and have unwound some
earlier price discounting. The near-term outlook among hospitality
contacts remained generally upbeat. However, corporate bookings remained
at very low levels at some high-end resorts.
Real Estate and Construction
Homebuilders reported improved new home sales across the region,
and that construction activity increased modestly from very low levels.
Several homebuilders noted that difficulty in obtaining mortgage
financing and lower property appraisals were impeding sales. New home
inventories remained down, sharply from a year earlier, and the majority
of homebuilders continued to cite year-over-year price declines.
Overall, the outlook for home sales and construction improved modestly
from the previous report.
Realtors indicated a slight improvement in existing home sales with
nearly half of those contacted reporting modest increases. Sales at the
low-end of the market continued to outpace those at higher price points.
However, sales growth at the low-end moderated from late-2009 levels,
while mid- to high-end home sales stabilized. Similar to comments from
homebuilders, many Realtors also noted that difficulty in obtaining
financing was impeding home sales. Most continued to cite downward
pressure on home prices. The outlook for sales over the next several
months continued to be modestly positive.
Low levels of commercial construction continued across much of the
District. Most contractors described activity as relatively flat
compared with previous reports, and a few cited additional weakness. The
volume of backlogs was little changed but remained lower than a year
ago. Most indicated that the demand for new construction continued to be
soft. Looking ahead, the majority of contacts anticipated commercial
construction will continue to be weak for the remainder of the year.
Manufacturing and Transportation
The majority of District manufacturers reported that new orders
increased and production levels improved. Contacts noted increased hours
worked and many anticipated employment gains in the short-term. A few
auto assembly plants recalled some workers. Freight demand continued to
improve from low levels. Regional rail shipments through mid-March were
up notably for automotive, chemical, and other raw industrial materials.
Banking and Finance
The flow of bank credit to businesses remained subdued. District
bankers continued to indicate that ample credit was available to
qualified borrowers, and many noted that the volume of loan applications
was low for households and small businesses. In contrast, several firms
noted that tighter credit standards were making it difficult for them to
obtain loans. Some contacts suggested that trade credit terms also
tightened with some suppliers having modified terms or reduced credit
without regard to payment history.
Employment and Prices
Unemployment remained high across the District in February and
March. Some employers indicated that public policy uncertainty had
contributed to some reticence to hire permanent workers. However, many
businesses continued to increase hours worked for existing staff, and
some increased the number of temporary staff, particularly in Florida.
District manufacturing and homebuilder contacts reported increases
in commodity-related material prices compared with a year ago, though
prices softened somewhat on a monthly basis. Several businesses
expressed concern that supply chain capacity reductions in some
industries could lead to further input price increases if product demand
increased rapidly.
Natural Resources and Agriculture
Crude oil production in the District edged up in late February and
March. The increase in output, combined with soft energy consumption,
pushed crude inventories in the Gulf of Mexico close to the top of their
seasonal average for this time of year. Recent wet weather and
colder-than-usual temperatures have negatively affected some crops in
Alabama and Florida and limited farm work in some areas.
** Market News International Washington Bureau: 202-371-2121 **
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