WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Sixth District summary, published
Wednesday:
Summary.
Sixth District business contacts indicated that the pace of
economic activity continued to slow in July and August. Retailers
reported a decrease in traffic and sales, and their outlook was less
positive than in previous months. Reports from the District’s tourism
sector were mixed as contacts outside of the oil-spill affected Gulf
coast experienced positive growth, but areas from Louisiana to the
Florida panhandle saw significant declines in visitors. Residential real
estate contacts noted that the pace of new and existing home sales
slowed, and their outlook remained pessimistic. Nonresidential real
estate activity remained weak. Manufacturers reported that the pace of
new orders growth slowed. Banking credit conditions remained constrained
and loan demand was reportedly weak. Labor markets improved modestly,
but most businesses maintained a strong preference for increasing the
hours worked of existing staff and expanding their use of temporary
hires rather than for hiring permanent employees. Transportation and
material prices rose slightly, but most firms expressed limited ability
to pass increases through to consumers.
Consumer Spending and Tourism.
Most District merchants reported that traffic and sales decreased
in July and August. Retailers continued to keep inventory levels low and
the outlook was less positive than in previous months. District
automobile dealers indicated that sales increased from a year ago.
The oil spill had a negative impact on tourism along the affected
Gulf Coast. Outside of areas affected by the oil spill, tourism
continued to show signs of improvement compared with last year.
Hospitality contacts in Miami, Nashville, New Orleans, and Orlando
experienced increasing hotel occupancy rates in July and August. In
addition, northeast Florida, Georgia, and mountain resorts in Tennessee
saw an increase in activity — some reportedly as a result of deflected
business from the oil affected areas. The cruise-line industry cited a
pickup in traffic and a modest increase in prices.
Real Estate and Construction.
Residential real estate reports showed that home sales weakened
further in July and August compared with a year ago. Realtors noted that
existing home sales fell slightly, while homebuilders said that new home
sales fell further below the year-earlier level. New home construction
softened further from already low levels. Realtors indicated that home
listing inventories continued to rise, but homebuilders conveyed that
new home inventories declined compared with a year earlier as a result
of very weak new home construction. Home prices weakened somewhat in
July and August and contacts noted mounting downward pressure on prices
across the District. Contacts’ outlook for both new and existing home
sales growth over the next several months was pessimistic.
Nonresidential construction activity remained weak.
Contractors noted that the pace of commercial development was below
the year-earlier level and backlogs remained low. Vacancy rates were
high across the District and contacts continued to witness downward
pressures on rents. Contractors’ outlook for the rest of the year
remained negative.
Manufacturing and Transportation.
Manufacturing contacts reported that overall activity was
expanding, but at a slower pace than in the previous report. Fewer
District manufacturers noted increases in new orders, and more said that
orders were lower. District trucking companies reported improved
revenues and a moderate pickup in freight volumes through August
compared with a year ago. However, railway companies described slower
growth in motor vehicles, chemicals, and housing-related shipments.
Banking and Finance. Uncertainty and conservative lending continued to
hamper loan activity across the District. Businesses cited difficulties
receiving credit and many firms expressed little or no interest in
applying for new loans because of low expectations for future sales or
orders. Businesses also reported refusing offers of credit because of
unfavorable terms from banks. However, multiple contacts indicated an
expansion of trade credit to create and extend lines of credit outside
of the traditional banking infrastructure. Personal and business
bankruptcies increased across the District. Employment and Prices.
Private payroll employment improved slightly in July, although many
businesses continued to note a strong preference for increasing existing
staff hours and using part-time or temporary staff rather than hiring
full-time employees. Contacts also reported that the pool and the
qualifications of applicants have increased significantly. While the
long-term impact of the oil spill on labor markets is still unknown,
businesses along the Gulf coast noted that, so far, job losses have been
largely offset by hiring in clean-up and mitigation efforts.
District contacts reported increases in commodity and
transportation-related prices compared with a year ago. Most firms
conveyed no plans to pass the increases on to consumers, opting instead
to continue to internalize cost pressures through a combination of lower
margins and increased efficiencies.
Natural Resources and Agriculture.
Local oil production increased slightly and Gulf of Mexico crude
inventories stayed near the top of their average range for this time of
year. Contacts indicated that the impact on production from the oil
spill were nominal. However, concern remains regarding the potential
longer-term impact of the deepwater drilling moratorium on the Gulf’s
energy production and the business impact of increased liability
insurance costs for independent oil companies.
Limited rainfall, coupled with hot temperatures, challenged crops
and livestock in most District areas. Short topsoil moisture levels were
widely reported across the District. In addition, dry weather conditions
have pushed some growers to an early harvest season.
** Market News International Washington Bureau: 202-371-2121 **
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