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

Banking and Finance

Banking contacts indicated continued weak loan demand. Loan growth
remains a concern for banks in the Sixth District. Lending levels
continued to fall as new opportunities remained highly elusive and very
competitive. Deposits increased as people and businesses added to their
savings. The majority of large firms continued to have ready access to
cash and lines of credit, while some small firms and many new firms that
sought credit continued to experience difficulty. There were reports of
non-bank entities, like private equity firms and groups of wealthy
individuals, becoming increasingly interested in small business lending.

Employment and Prices

Employers continued to manage their labor supply very tightly. Most
contacts indicated that the outlook for hiring remained restrained by
modest expectations regarding future sales. Several reports suggested
that permanent employees were primarily being used to maintain a firms
core business, while specific projects were being assigned to
contractors and temporary hires. Firms continued to seek efficiency
gains through investment in technology and other cost-saving
applications. Hiring contacts highlighted having difficulties finding
qualified candidates for specialized positions, in some cases, because
of a lack of geographic mobility for potential hires. For lower wage
positions, agencies reported numerous employment opportunities; however,
the positions were contingent on passing skills tests and/or background
checks, which many applicants failed.

On balance, contacts reported that input prices had receded or
leveled off from earlier this year. Retailers continued to heavily
discount products. Businesses mentioned pursuing various cost-cutting
measures in order to support positive margins. Manufacturers noted
general success passing on earlier increases in commodity prices. Any
plans to increase wages were generally limited to employees with a high
degree of technical skills.

Natural Resources and Agriculture

District oil and gas production declined in early September as
energy producers reduced offshore operations and vacated staff in the
path of Tropical Storm Lee in the Gulf of Mexico. Industry contacts
indicated that plans to invest in increased production capacity were
proceeding. In particular, contacts reported that new drilling
technology had reduced costs and increased extraction capabilities for
both oil and gas.

Drought conditions persisted in much of Georgia and parts of
Alabama. High livestock feed costs were pressuring poultry producers but
were being successfully passed on by cattle producers. Corn prices
remained elevated and cotton prices paid to farmers increased modestly
since the last report, although cotton futures prices have declined
somewhat further in recent weeks. Agriculture contacts continued to
report concerns over labor shortages and production issues that they
tied to recently passed immigration laws in some states.

** Market News International Washington Bureau: 202-371-2121 **

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