Beige Book: Did Weather Cool the Nation's Economic Growth?
Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. These findings are reported in the Beige Book. Then, one of the Reserve Banks is randomly selected to write the national summary, a digest of all 12 Banks' reports. This time, my Atlanta Fed colleagues and I wrote the most recent national summary.
Similar to recent incoming economic data citing possible weather-related effects on consumer spending, manufacturing, and transportation (to mention a few), the national summary of the Beige Book cites the weather as also having an impact on activity in several sectors. Here are some Beige Book excerpts that mention weather-related economic effects (emphasis mine):
Consumer spending and tourism:
Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity. Weather was also cited as a contributing factor to softer auto sales in many Districts, with the exception of Cleveland, which saw strong gains.
Recent winter weather conditions benefited many ski resorts in Kansas City, Richmond, and Minneapolis. Atlanta and Boston also indicated that hotels fared well from the >weather, but that restaurants, museums, and other attractions were negatively impacted. Airline contacts from Dallas indicated solid to slightly stronger demand, with some temporary disruptions due to severe winter weather across the nation.
Nonfinancial services and transportation:
Both New York and Philadelphia reported that severe winter weather reduced demand for services in their region.
Severe weather reportedly disrupted supply chains and delayed shipments in several Districts. In Dallas, railroad cargo volumes fell slightly below year earlier levels, with winter weather conditions across the country largely to blame. Manufacturing sales and production in several Districts were negatively impacted by severe winter weather; however, modest improvements were noted in Boston, Atlanta, Minneapolis, and Dallas.
Real estate and construction:
Residential real estate markets continued to improve in several areas, albeit modestly. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions.
Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather.
Agriculture and natural resources:
Severe winter weather affected several Districts with some crop damage being reported by Richmond and Atlanta, while Chicago noted disruptions in the flow of agricultural products. Both Kansas City and Dallas cited dry conditions adversely affecting wheat crops, while San Francisco reported concerns about water shortages and water costs.
Employment and prices:
Since the previous report, the pace of hiring had reportedly softened in Boston, Richmond, and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather.
Chicago, Minneapolis, and Dallas noted that unseasonably cold weather had pushed up costs for some energy products.
Although it seems that the weather has had a negative effect on economic growth so far this year, we won't know the full impact until a little more time has passed and Mother Nature decides to bring on the sunshine.
Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:
Employment: Since the last report, job growth remained muted across the District. Contacts in construction, manufacturing, energy, hospitality, and real estate noted modest growth in employment.
Prices: Most contacts reported modest and relatively stable labor and material cost pressures. Construction industry contacts remained a notable exception, indicating strong upward pressure on labor costs and some material prices.
Consumer spending and tourism: Merchants reported a slow start to the year with sales growth declining. Many contacts noted that the drop in sales growth was partially attributed to the unusual winter weather experienced in parts of the region. Hospitality contacts reported an increase in business and convention bookings.
Real estate and construction: Most brokers said sales were slightly up compared with a year earlier, and more contacts noted that sales activity was in line with their plan for the period. By most accounts, inventory levels had fallen on a year-over-year basis. The majority of contacts reported that home prices remained ahead of the year-earlier level but that price gains have slowed on a month-over-month basis.
The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level, although most reports indicated that unsold inventory levels had remained unchanged from a year ago. The majority of contacts also reported modest home price appreciation.
District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year. Most contacts reported that their backlog was ahead of year-earlier levels.
Manufacturing: Manufacturing contacts in the region cited expanding activity from January through mid-February, but the pace of growth was moderate. Contacts reported improvements in new orders and production. However, a number of contacts stated that the unusual winter weather affected production in late January, and output was lower than planned for that month.
Banking and finance: A number of lenders reported increases in purchase mortgages, but not enough to offset the declines in refinances.
The next Beige Book will be published April 16.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department.
Does Fat Tuesday Give New Orleans a Fat Wallet?
"Happy Mardi Gras!" is what's been enthusiastically shouted across the streets of New Orleans the past couple of weeks. Well, there's that and "Throw me something, Mister!" It's Mardi Gras season—a time of king cakes, wild and crazy Bourbon Street, and extravagant parades that include musicians, dancers, and colorful floats filled with masked locals who throw shiny plastic beads and trinkets to excited crowds. Though it may seem like a haze of decadence and chaos spanning two weeks in New Orleans, a lot of planning and money from locals and tourists alike goes into this lively time of year. More than a million people pack the city's streets during the two weeks leading up to Mardi Gras day, also known as Fat Tuesday (which falls on March 4 this year). So, what does Mardi Gras mean to the local economy?
In 2009, the Carnival Krewe Civic Foundation Inc. commissioned a biennial study of the economic impact of Mardi Gras. Tulane University economics professor Toni Weiss prepared the 2009 and 2011 reports. However, in 2013, New Orleans hosted the Super Bowl during Mardi Gras season, making it difficult to separate the economic effects of the two events. Therefore, the next study will reflect 2014 data.
According to the 2011 report, the economic impact on the city was $300 million, accounting for 1.5 percent of New Orleans's gross domestic product. It's worth noting that this figure is likely understated as it does not include incremental restaurant business, airport usage, or any businesses' fixed investment. It may also underestimate local citizens' Mardi Gras–related spending. Weiss evaluated seven main categories in the study: lodging and nonlodging, food and alcohol, merchandise, Mardi Gras–themed tours, Krewes (organizations of revelers who put on the parades, host Mardi Gras balls, and participate in social events throughout the year), Krewe members (the aforementioned revelers who spend their own money on the events), and the city government. Direct expenditures from these categories during the 2011 Mardi Gras season were an estimated $144 million.
So where did the other $156 million come from? According to Weiss, the Mardi Gras "franchise" the city created accounts for the difference. It includes an extensive infrastructure of lodging, food and drinking establishments, retail shops selling themed merchandise, and other factors from which other events and businesses (for example, conventions unrelated to Mardi Gras specifically) could benefit. The net fiscal benefit to the city was more than $13 million, or a return of $8.45 for every city dollar spent.
If you ask me, that's a pretty sizable return on investment—enough to fatten the city's wallet quite a bit.
Weiss's team will begin collecting data on the 2014 Mardi Gras season in a couple of weeks, and I look forward to seeing what the new results show.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
Tennessee’s Auto Industry: Pitfalls and Potholes
The automotive industry in Tennessee is one of the big drivers of the state’s economy. Nissan established its first U.S. manufacturing facility in Smyrna in the early 1980s, and auto-related investments have grown in the state ever since. General Motors opened a plant in Spring Hill in 1990, and Volkswagen opened its Chattanooga plant in 2011. These three facilities collectively employ more than 12,000 workers, a total that doesn’t include the vast amount of automotive suppliers that call Tennessee home. Currently, Tennessee is the largest employer of auto-industry workers in the South.
Coming out of the Great Recession, Tennessee is now well positioned to continue its standing as a competitive destination for the automotive industry. In October 2013, the Brookings Institute produced a report titled “Drive! Moving Tennessee’s Automotive Sector Up the Value Chain.” The report pointed out the Volunteer State’s various advantages in the auto industry, which included its geographic location, strong transportation infrastructure, and favorable cost structure.
The report also shared some interesting employment numbers. For example, Tennessee’s share of auto-manufacturing employment in North America increased to an all-time high of 3.3 percent by the end of 2012. Also, more than 12 percent of all jobs created in Tennessee since the recession are related to the auto industry. Needless to say, carmaking is important to the state’s economic health.
The Brookings report also pointed out some competitive challenges and pitfalls the state will need to navigate in the coming years:
- Cost pressures: Input costs continue to rise, as does the consumer’s demand for greater value. Production increases in low-wage countries will continue to add pressure, even though the labor-cost gap between U.S. locations and low-cost countries is closing.
- Demographics and workforce: Technology advances have made the automotive-manufacturing workplace much more sophisticated. The challenges to find an adequately trained workforce will be a constant challenge.
- Technology: The entire automobile production system and product line will require constant technological upgrades to keep pace with changing regulatory requirements. For innovations to be effective, they will need to reach far into the automaking supply chain.
The Brookings report also suggested that the state lacks a strategic approach to maintaining a business-friendly environment for advanced industries. For example, Tennessee ranks in the bottom fifth of states in terms of tax competitiveness for new research-and-development firms and labor-intensive manufacturing.
The report also indicated that holes exist in Tennessee’s workforce-development programs. The state falls short in literacy, numeracy, and educational attainment, gaps that complicate the state’s ability to ensure the availability of an educated workforce for the auto industry. Also pointed out in the report was the state’s lack of research and development activity in the auto sector. The state also lacks a fertile technology network that caters to auto-sector suppliers, particularly the smaller ones.
Despite all these factors, the future for Tennessee’s auto industry looks bright. The state has momentum and the necessary resources to adapt to future challenges. Tennessee has the continent’s broadest automaking supply chain, a huge advantage in today’s auto-manufacturing environment. Past success does not guarantee future performance, but hopefully Tennessee can avoid the potholes on the road ahead.
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
Southeast Housing Update: Modest Improvement Continues
According to the latest results from our Southeast housing market poll, contacts continued to indicate that growth remained positive. More than half of our Southeast builder and broker contacts reported that sales increased modestly on a year-over-year basis (see the chart).
Many builders indicated that buyer traffic had increased on a year-over year-basis. Reports from brokers were mixed (see the chart).
The majority of our Southeast builder panel indicated that inventory levels had remained unchanged from year-earlier levels, although most of our Southeast broker panel indicated that inventory levels had fallen from year-earlier levels (see the chart).
Most brokers and builders continued to report that home prices had increased slightly in January compared to year-ago levels (see the chart).
Two-thirds of brokers reported that the amount of available credit either met or exceeded demand (see the chart).
Similarly, two-thirds of builders indicated that the amount of available credit met or exceeded demand (see the chart).
It’s worth noting that while this picture hasn’t drastically improved over time, it hasn’t deteriorated much either despite the recent implementation of mortgage regulations (for example, thequalified mortgage rule, which went into effect on January 10). We plan to keep a close eye on this question as the year unfolds.
Residential construction update
Our builder contacts indicated that construction activity increased slightly on a year-over-year basis but remained unchanged month over month. Nearly three out of four builders reported that activity was in line with their plan for the period.
You may recall from previous SouthPoint posts that builders have faced challenges securing acquisition and development financing for lot development (here) and that builders identified lot availability as one of the biggest risks to their outlook (here). We posed a special question to our builder panel in an effort to gain more insight into the current lot inventory situation. Here are a few of the main takeaways:
- Overwhelmingly and regardless of the market, builders reported that finished lots are extremely hard to come by in desirable locations. With few finished lots in the most desirable areas, many builders have moved to B and C locations for vertical construction. (B locations have become the new A locations, and C locations have become the new B locations.)
- As a result of the increased demand for finished lots in good locations, contacts indicated that lot prices were appreciating rather quickly, and that this rate of price appreciation was problematic because the added cost on the front end does not align with the valuation that can be achieved on the back end.
- A few builders reported that they were in the process of developing new lots in A locations, but many more contacts noted that it was cost-prohibitive to develop raw land in any location at this time. The latter group reported that private acquisition and development money was available to fill the void that banks have left but noted that it was more expensive and would significantly raise the cost of development to the point where it becomes no longer viable. No one on the builder panel seemed to think that it would be viable to develop raw land in B and C locations at this point.
Outlook on sales and construction activity
Over the next three months, most builders and brokers expect home sales to increase. Although expectations remain fairly positive, contacts were slightly less optimistic about sales growth relative to their year-earlier responses (see the charts).
Nearly two-thirds of builder contacts expect construction activity to increase over the next three months. With that said, builders’ outlooks appear to be slightly less optimistic relative to their year-earlier responses.
Note: January poll results are based on responses from 42 residential brokers and 23 homebuilders and were collected February 3–12, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.
If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
Will the Ice Cause the Recovery to Lose Traction?
In the wake of two strong waves of unusually severe winter weather here in the Southeast—including enough ice here in Atlanta to all but shut down the roadways, even for the most experienced drivers—my colleagues and I have been spending some time looking into the possible implications of such disruptive weather for our economy.
Yesterday in his speech at Mercer University in Macon, Georgia, our boss here at the Atlanta Fed, Dennis Lockhart, pointed out that the recent spurt of unusually harsh winter weather is helping to cast a bit of a shadow on estimates of underlying economic conditions at the start of 2014:
Mixed incoming data on economic activity in December and January have raised concerns about whether the economy has traction at [the] faster growth pace [that we saw in the second half of 2013]. There appears to have been a slowdown. Weather effects may very well have dampened retail sales, auto sales, housing starts, manufacturing activity, and of course transportation, among others.
In fact, the REIN (Regional Economic Information Network) team at the Atlanta Fed reached out to our contacts across the Southeast to try to get a read on the impact of the winter storms on regional business activity. A strong majority of our manufacturing contacts confirmed weather-related disruptions as a result of the storms, as employees were unable to make it to work on icy roads. Reports indicated that overtime work or increased production would make up for the lost output during the outages in the weeks following the storm. In other words, though manufacturers did indicate that, on net, production for the first quarter would likely not be affected by the storms, the forward shift in the timing of that production may skew seasonally adjusted data for output and hours worked in the region downward in the first month or two of the year.
And it wasn't just manufacturers who reported a weather-related dip in activity. Reports from construction and agricultural contacts were mixed. Merchants in the region were more downbeat, reporting a decline in sales growth at the start of the year, which some contacts attributed to the unusual weather. Contacts in the fashion and apparel industry were particularly concerned about the implications of the storms on yearly earnings, noting that cold weather keeps shoppers inside and that even once the temperature picks up, it is unlikely that the increase in sales will be sufficient to make up for revenue lost during the cold spell.
All in all, it appears that the weather could certainly put some downward pressure on reports of economic growth for the first two months of 2014. The full impact of that effect—and how lasting the recent signals of softness will be—can only be assessed once we have more hard data in hand. President Lockhart summed up his views yesterday:
...the current quarter is difficult to read as an indication of the most likely story for the full year 2014 and first part of 2015. The recent mixed data could be just a temporary thing—as the weather explanation suggests—or something more fundamental going on. While I am tracking the numbers carefully, at the moment I think it's too early to draw a conclusion. Even though the first quarter this year may turn out to be soft, I am "looking through" the recent information to a full year of sustained higher growth. In that sense, my outlook remains optimistic for the full year.
By Laurel Graefe, Regional Economic Information Network director at the Atlanta Fed
Stop, Look, and Listen
We here at the Birmingham Branch of the Atlanta Fed talk to a lot of folks about Alabama’s economy. But when I say we talk, what I should say is we stop and listen, and our contacts have plenty to say.
Recent conversations with Alabama contacts do not indicate accelerated hiring levels in our state. Dennis Lockhart, president of the Atlanta Fed, was recently in town speaking to the Birmingham Rotary and had this to say about December’s national jobs report:
It came in at a 74,000 net gain. A number closer to 190,000 was expected. My reaction—and that of many of my colleagues—was to "look through" the December jobs report and assume the economy remains on the higher growth track enjoyed in the second half of 2013.
Note: President Lockhart was in Birmingham on Wednesday, February 5, two days before the release of the January jobs data, which were better than December but not as large as hoped. (The economy added 113,000 jobs in January 2014.)
In that context, I took a look at Alabama’s employment numbers and found that job gains have occurred in each of the last three months, with December showing a gain of 4,800 jobs in Alabama (see the chart).
A deeper look at payroll employment in Alabama shows that although leisure and hospitality and education and health care jobs have surpassed prerecession levels, other sectors have not fared as well, particularly the information and construction industries (see the chart).
And though we know that job losses occurred throughout the state, all of Alabama’s metro areas have slowly begun to rebound. The Auburn-Opelika and Tuscaloosa areas—both home to large state universities—have regained the level of jobs that were lost during the recession (see the chart).
Finally, pulling back to take a more historical perspective, the Alabama employment situation, while improving, has not reached prerecession levels (see the chart).
On a bright note, there are definitely some positive hiring stories, most recently in the automotive sector. And although we continue to hear stories of shortages for certain skilled laborers, we also hear about creative ways Alabama employers and educators are partnering to update and align training with the skills that are needed for jobs today and in the future.
The number of jobs regained since the recession ended is only one of many ways to assess the health of the labor market. On a national level, the Atlanta Fed looks at many facets and has developed an interesting (and regularly updated) visual depiction that gives a much broader view: our labor market spider chart.
Meanwhile, here at the Fed, we will continue to supplement our analysis of state and national economic data by listening to what people are telling us about their own experiences.
By Teri Gafford, a Regional Economic Information Network director in the Atlanta Fed’s Birmingham Branch
Retailers Heading into 2014 with Momentum
"Thank you...thank you very much."—Elvis Presley
Back in mid-December 2013, retailers appeared to be channeling Elvis Presley and the holiday song he popularized, "Blue Christmas," when preliminary holiday retail sales were somewhat disappointing. Well, y'all: Elvis has left the building! Compliments of heavy discounts, promotions, and last-minute deals, retailers ended the year with positive growth. Thank you...thank you very much.
According to the National Retail Federation, total retail sales increased 3.8 percent year over year, and nonstore sales (online and e-commerce sales) grew 9.3 percent.
The shopper—and her behavior—is interesting to follow. So why did I just refer to the shopper as "her"? Ask any retailer, you'll find that most shoppers are female. And in 2013, volatility seemed to be her middle name as her purchases fluctuated considerably. So let's take a look at her shopping behavior in core retail sales, which is a statistic that removes automobile sales, gasoline, and building materials. Core sales ended 2013 with the highest results since before the recession, in 2006 (see the chart).
Retailers did end the year on a positive note, even with the deep discounts and promotions. As I once heard a colleague say when describing data movement, "Anything above zero is good; below zero, bad."
So how is our shopper feeling in the wake of this past holiday season? According to the Conference Board's consumer confidence index, the consumer reported two consecutive months of strong confidence: In December, the index posted 77.5 points (revised), and in January, the index stood at 80.7 points. The Conference Board's present situation index and its expectations index presented further evidence in January that the consumer is feeling a bit better. The present situation index rose to 79.1 from 75.3, and the expectations index rose to 81.8 from 79.0 points.
We'll check in with shoppers next after Valentine's Day, when we assess that holiday's sales. So where will Cupid's arrow land? We'll know sometime in March. Until then, happy shopping!
By Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
Regional Manufacturing Treads Water in January
The South has been unusually cold this winter. Like much of the country, we have been dealing with the polar vortex. I'd never heard the term "polar vortex" until this year, and I hope I don't hear it again for a long time.
The polar vortex appears to be influencing manufacturing as well. Many analysts believe that the unseasonably severe winter weather was responsible for the latest drop in the national purchasing managers index (PMI) index, which is produced by the Institute of Supply Management. January's index reading of 51.3 points was a significant 5.2 point drop from December. The new orders subindex experienced its largest month over month drop since December 1980.
Conversely, the Southeast PMI increased slightly from December and at least got its head above water. After contracting in December, the index increased 2.2 points in January, to 50.6.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces thesurvey, and it provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of purchasing managers from manufacturing companies and analyzes trends concerning new orders, production, employment, supplier delivery time, and inventory. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
Despite the pedestrian increase in the Southeast PMI index, it crept back into expansion territory. The new orders subindex rebounded 6.1 points to 49, up from a dismal December reading of 42.9. Likewise, the production subindex increased 5.1 points to 47.9. Production declined significantly in December when it lost 12.2 points. The employment subindex increased 3.2 points from December's 52 points, indicating that survey participants increased payrolls on net in January. Supplier delivery times fell 4.1 points from 55.1 in December, to 51.0 in January, suggesting that purchasing agents are getting their supplies faster than the previous month. Finished inventories increased to 50.0 in January, up a full point over December's 49, meaning that manufacturer customers are generally satisfied with their inventory levels (see the chart).
The most exciting and encouraging news in the latest PMI report for the Southeast was the responses to the production expectations question. Survey participants were asked for their production expectations for the next three to six months. In January, 62 percent of respondents expect production to be higher going forward. The unofficial optimism level gleaned from this question has been rising for three consecutive months. With any luck, the increased optimism will manifest as higher production throughout 2014.
While the January PMI reading just barely got its head above water, increases in new orders, production, and employment are a good sign. In the coming months, let's hope manufacturing does a little less treading water and a lot more swimming. Swimming is so much more fun, and it means there's no polar vortex.
By Troy Balthrop, an Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
Atlanta Fed Survey Highlights Regional Employment Plans for 2014
Given that the Federal Reserve’s dual mandate calls for maximizing employment, it shouldn’t surprise anyone that we continuously ask ourselves questions about labor market conditions. But we also ask our contacts. For the third year in a row, we reached out to our Regional Economic Information Network and asked the same questions regarding their employment plans for the year. The survey was conducted during January 6–10 and resulted in 554 responses. The sample represented a wide variety of firm types and sizes, and we want to discuss the results here.
The first question simply asked: Do you expect your firm to increase employment, leave employment unchanged, or decrease employment in 2014? A total of 46 percent of respondents said they planned to increase employment levels, similar to results from the previous two years. Another 44 percent indicated they planned to leave employment levels unchanged, a slight increase from a year ago and almost identical to two years ago. The remaining 10 percent of participants planned to decrease payrolls, down from 13 percent in January 2013 and nearly the same as reported in 2012 (see the chart).
Digging a little deeper by singling out the 46 percent of firms that indicated that they planned to increase employment, we then asked contacts to select the most important factors driving their decision. Participants were instructed to rank the three factors in order from 1 (most important) to 3 (third most important). The results largely mirrored our findings from previous years (see the chart).
A majority cited high expectations for sales growth as the most important reason. The second most often cited reason was the firm’s need for skills not possessed by existing staff. The third reason was that the firm’s current staff was overworked. However, in looking at totals across rankings, another frequently cited issue was improvement in the firm’s financial position.
On the flip side, we asked all participants to rank (in the same manner as the previous question) the three most important factors restraining hiring activity. Interestingly, in all three categories (first, second, and third most important), a majority selected the same factor: keeping operating costs low. Other frequently selected reasons were uncertainties related to health care costs, regulations, government policies, and expectations for low sales growth. These results were also similar to our findings from the previous two years (see the chart).
In a nutshell, we can see that employment activity remains constrained by some of the factors mentioned above. However, as the latest Southeastern Insights, reports, hiring should modestly expand. The latest data from the U.S. Bureau of Labor Statistics, which indicated that net monthly payroll growth for the district averaged 30,200 for 2013 (up slightly from 26,200 a month in 2012), strongly support our conclusion.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed’s research department
Southeast Commercial Construction Update Strikes Upbeat Note
The Atlanta Fed’s fourth quarter 2013 commercial construction poll results were fairly optimistic. The majority of commercial construction contacts indicated that pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).
Most contacts reported backlogs greater than year-earlier levels, suggesting a healthy pipeline of construction activity (see the chart).
More contacts reported upward pressure on labor costs than in previous polls (see the chart). Perhaps not surprisingly, this trend of upward pressure on labor costs for commercial contractors is consistent with our recent reports (here and here, for example) of upward pressure on labor costs for residential builders.
Most contacts also noted upward pressure on material costs and have consistently reported this pressure several quarters in a row (see the chart).
Relative to recent polls, the number of respondents reporting that the amount of available credit exceeded demand increased; the number of respondents reporting that the amount of available credit fell short of demand also increased (see the chart). Another way of viewing the results is that more than half of the respondents indicated that amount of available credit met or exceeded demand, which has been the case for three consecutive quarters.
When asked what type of projects will dominate the landscape during 2014, business contacts indicated that they plan construction activity across a wide variety of property types. The property types mentioned include multifamily housing/senior housing, education, office, health care/medical, infrastructure/energy, retail/restaurant, municipal buildings, hotels, and industrial/warehouse.
Note: Fourth quarter 2013 poll results were collected January 6–15, 2014, and are based on responses from 19 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.
If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department