WASHINGTON (MNI) – The following is the second part of the text of
the Atlanta section of the Federal Reserve’s Beige Book report on
current financial conditions released Wednesday:
Banking and Finance. Liquidity levels at depository institutions
remained high as many banks reported strong deposit growth coupled with
continued weak loan demand. Some banking contacts noted that they cut
loan prices to attract new customers and offered loan concessions
proactively to retain existing clients. There was also little demand for
new housing loans, although bankers reported mortgage refinancing and
automobile loan activity increased. In terms of commercial lending, loan
growth among community banks and credit unions was primarily limited to
owner-occupied enterprises, while some larger banks reported growth in
areas such as energy and healthcare.
Availability of credit/capital was not an issue for most large
firms because of positive cash flow, adequate cash reserves, or a
strong, long-standing relationship with their bank. Small business
contacts, however, continued to report difficulty in obtaining credit
from banks and some have turned to non-bank institutions for financing.
Employment and Prices. Contacts across most sectors continued to
report modest hiring activity across much of the District. Most of the
hiring has been temporary in nature and tied to seasonal employment.
However, there were some scattered reports among healthcare and
hospitality contacts in South Florida that hiring was occurring as a
result of increased demand or expansion. Agriculture contacts reported
labor shortages across Alabama, citing newly enacted immigration
legislation as the culprit. Firms also noted reluctance towards adding
new full-time employees because of uncertainty surrounding healthcare
reform, a large pool of both over and under qualified applicants, and
because productivity enhancements have made several positions redundant.
Contacts were generally not as concerned with input costs as they
had been in previous months, noting that commodity prices had leveled
off or eased somewhat. Notable exceptions included reports of
restaurants facing elevated food costs and ongoing price pressures from
high transportation and shipping costs. Many businesses reported
slightly improved margins in late November and December. However, with
the exception of high-end apparel retailers and hospitality contacts,
firms reported having little pricing power. In the Atlanta Fed’s monthly
business inflation survey of firms in the Sixth Federal Reserve
District, respondents indicated in December that their inflation
expectations for the coming year are 1.9 percent, down slightly from
November. Looking forward, businesses indicated that costs for materials
and labor may influence them to raise prices. Respondents did not expect
changes in productivity, sales, or margin adjustments to have a
significant influence on prices over the coming year.
Natural Resources and Agriculture. Energy industry contacts
indicated that they continued to add to their workforces and that plans
to invest in increased production capacity were proceeding. Permitting
for shallow water rigs in the Gulf of Mexico picked up slightly. The
first lease auction for deepwater exploration since last year’s Gulf oil
spill occurred in December with 191 tracks being sold for $337.7
million. While much of the District witnessed various degrees of drought
ranging from “abnormally dry” to “exceptional” in late November and
December, both Georgia and Louisiana experienced the most severe
conditions. Demand for cotton was flat as a result of global economic
concerns and competition from synthetic fibers. Prices for cattle and
hogs continued to increase because of strong foreign demand. Several
regional agritourism contacts noted plans to expand next year.
End:
(2 of 2)
** Market News International Washington Bureau: 202-371-2121 **
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