WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Sixth District, published
Wednesday:

SIXTH DISTRICT – ATLANTA

Summary.

Reports from Sixth District business contacts indicated that
economic activity expanded at a modest pace in June and early July. The
outlook among most firms remained cautiously optimistic, although the
majority of contacts acknowledged that risks were weighted to the
downside.

Retailers noted that sales improved slightly, but cautioned that
consumers appeared to be conservative in their purchases. Auto
dealerships reported continued strong sales. The hospitality sector
continued to experience steady growth as occupancy and room rates
continued to rise. Most brokers and homebuilders reported modest
increases in sales and prices from very low levels of activity, while
contractors stated that the apartment sector remained strong.
Manufacturing firms indicated that production continued to expand, but
at a much more moderate pace than earlier in the year. Bank lending
activity increased slightly for residential real estate, while auto loan
activity remained robust. Employment growth for the District was subdued
and employers remained cautious about future hiring. Lower energy prices
have eased pricing pressures for many firms and wage pressures remained
modest.

Consumer Spending and Tourism.

District retail sales activity improved slightly in June and early
July, but merchants reported that consumers remained very conservative.
Several discount retailers and auto dealers signaled strong sales, while
most department stores conveyed more modest activity. Restaurant and
food service contacts reported that demand had softened a bit, but sales
at higher-end establishments remained strong.

Tourism activity and business travel remained strong and the
outlook among contacts was positive for the rest of the year. Occupancy
and room rates were up in many parts of the District. Recent reports on
convention bookings and theme park attendance were also solid. Concerns
shared earlier in the year regarding rising fuel costs and the potential
impact on travel and spending had abated. However, concerns were shared
about the potential impact of economic and financial stress abroad and
the effect that would have on international travel, especially to
Florida. There continued to be a drop off in cruise line bookings
compared with earlier in the year.

Real Estate and Construction.

District residential brokers indicated that home sales were flat to
slightly up compared with year-ago levels. Reports indicated strong
sales at the middle price points, while several brokers noted that
declining inventories of foreclosed homes were limiting investor-driven
sales. Brokers also reported that the decline in inventories has helped
stabilize home prices in many areas. Most brokers reported that home
prices were flat to slightly up compared with a year earlier. However,
contacts continued to note some downward pressure on home prices
resulting from low purchase offers and appraisals that were coming in
well-below asking and offering prices. The sales outlook among brokers
remained positive with most anticipating continued modest year-over-year
home sales gains.

District homebuilders reported that new home sales and construction
rose modestly compared with year-ago levels. The majority indicated that
new home inventories declined further on a monthly and an annual basis.
Most builders reported that new home prices were flat to slightly up
compared with a year earlier. Price gains were strongest among Florida
builders. Contacts noted that multi-family construction remained robust.
In the near-term, homebuilders expect sales and construction to post
modest gains compared with a year earlier.

Apartment sector gains drove improvements in the District’s
commercial real estate markets as occupancies rose and rental rates
increased. The region’s office and industrial sectors saw small
improvements as vacancy rates moderated somewhat; however, reports on
District retail real estate continued to be more mixed. The majority of
commercial contractors said that construction activity was flat on a
year-over-year basis. The majority of contacts anticipate a modest
increase in private commercial construction activity through the
remainder of the year, while public works projects are expected to
decelerate.

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** MNI Washington Bureau: 202-371-2121 **

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