WASHINGTON (MNI) – The following is the first part of the latest
Beige Book survey of economic conditions in the Federal Reserve’s Sixth
District, published Wednesday:
Summary.
Sixth District business contacts described economic activity as
expanding at a somewhat stronger pace in January and early February
compared with late last year. Expectations were generally more positive,
although firms continued to express caution with regard to the outlook.
Retailers noted that sales and traffic increased compared with a year
ago and auto sales remained robust. Hospitality contacts, with the
exception of cruise lines, reported strong bookings for this year.
Homebuilders and brokers reported that unseasonably warm weather has
helped bolster residential real estate activity by pulling some activity
forward. Nonetheless, overall home sales and construction levels
remained weak apart from the generally robust multifamily sector.
Manufacturers and transportation contacts continued to note positive
activity on balance. Bankers reported a modest improvement in loan
activity at larger institutions. More firms reported increased hiring,
although contacts continued to signal they approached hiring decisions
very cautiously. Concerns over increased input costs generally eased as
most firms reported that input prices leveled off. Only a few contacts
reported having significant pricing power.
Consumer Spending and Tourism.
District retail contacts noted that sales and traffic in January
and early February were up from a year ago. Final holiday sales reports
were generally positive as slightly over half of our retail contacts
indicated that sales were better than last year. Roughly half noted that
inventory levels were up slightly compared with last month, and most
were satisfied with current levels. Most merchants expect overall sales
to improve over the next three months. Retailers also expect overall
sales to improve modestly over the course of 2012. Auto dealers noted
that the warm weather experienced in January likely boosted sales for
the month, and they anticipate new vehicle sales to continue to improve.
Hospitality contacts reported that tourism activity remained strong
and most were optimistic regarding the outlook for leisure and
hospitality spending in 2012. Attendance for major conventions increased
and bookings and lead volume rose, according to business travel
contacts. However, there were concerns about higher fuel costs and the
adverse impact it may have on drive-to traffic at regional tourist
destinations. Cruise line bookings have suffered in the wake of the
maritime disaster in Italy.
Real Estate and Construction.
The majority of District residential brokers reported that home
sales accelerated in January and early February and stand above levels
from the same time period last year. However, reports from Florida
brokers were more mixed. Contacts noted that inventory levels continued
to decline on year-over-year basis and home prices were nearly even with
a year ago. The outlook among brokers for sales growth continued to
improve with most anticipating modest year-overyear gains over the next
several months.
Most District homebuilders indicated that new home sales and
construction activity growth, measured year-over-year, increased
slightly during January and early February; however, several contacts
noted that unseasonably warm weather in the region likely pulled some
activity forward. Builders continued to report downward pressure on home
prices while new home inventories remained below year-earlier levels.
Contacts noted that multifamily construction remained robust. Over the
next several months, homebuilders anticipate new home sales and
construction to be flat to slightly up compared with a year earlier.
Most commercial real estate contacts indicated that conditions
continued to improve slowly in the region. Contractors noted a slight
improvement in demand but the market remained very competitive and
activity remained at low levels. Brokers continued to report modest
improvements in demand for space in several parts of the District with
some noting that rent concessions had abated. The outlook among contacts
was similar to our last report with most contractors and commercial real
estate brokers anticipating that construction activity will improve
slowly during 2012.
Manufacturing and Transportation.
Manufacturers across the region noted more positive results in
January and early February compared with previous reports. In
particular, firms reported increased levels of new orders along with
improved expectations for future orders. Most contacts also signaled
that inventory levels have risen in line with these improved order
expectations. Three major auto manufacturers announced plans to increase
production at their facilities in Alabama and Georgia, and a foreign
automaker also noted that a parts manufacturing facility will relocate
to the Sixth District.
Transportation contacts reported that inventory-building trends
appeared to be similar to the end of last year. A freight forwarding
company noted that orders were stable and a large railroad firm
continued to report strong increases in auto shipments. Coal inventory
levels declined at the end of last year, but in recent months have
exceeded targeted levels as mild weather and low natural gas prices
dampened demand for coal-fired electricity generation. Contacts noted
that both imports and exports have leveled off since the beginning of
the fourth quarter of 2011, although trade with Latin America continued
to experience modest growth.
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** Market News International Washington Bureau: 202-371-2121 **
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