The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Is Florida Finally Beginning to Flourish Again?
In March, we shared the view of our contacts in the Regional Economic Information Network (REIN) in north and central Florida. Those contacts described modest but sustained growth in activity in the first quarter of the year. That sentiment continued as winter turned into spring, with reports of increasing activity and greater optimism for continued growth during the remainder of the year.
Since mid-March, the REIN team in the Atlanta Fed’s Jacksonville Branch held 13 one-on-one interviews, one roundtable with a mix of business leaders, a Trade and Transportation Advisory Council meeting (recently summarized), as well as our branch board meeting. Although meeting participants noted acquisitions as a primary growth engine for most firms, some firms are expanding capacity to meet improving demand. Community banks are reporting increased commercial activity as bigger banks trim lines on small businesses. Though loan demand is still relatively soft, our contacts characterized clients as somewhat more confident, which bodes well for future lending activity. One banker cited noteworthy increases in credit card usage and home equity loans.
Retail contacts continue to express concerns about low-income consumers but note that the slowly improving labor market is resulting in somewhat more spending. In central Florida, contacts noted strong spending by more affluent consumers, including foreign visitors who are seeking high-end retail and dining. Robust home sales and price appreciation, accompanied by declining lender-mediated sales, were widely reported. Commercial construction is on the rise, especially in sectors such as health care, manufacturing, apartments, and higher education.
A focus on cost-cutting along with productivity-enhancing efforts continues. As one chief executive officer put it, “People are the last thing we’ll invest in.” Another company has committed to keeping its general and administrative expenses flat, which will result in support staff cuts to offset the increased cost of technology investments and health care. Two other large contacts noted significant reductions of full-timers to avoid having to provide health care coverage and to “be more in line with the industry.” We increasingly hear more about firms restructuring employee health plans and benefits to reduce costs to the company, including shifting more cost burden to the employee, restricting eligibility for spouses who may have access to insurance elsewhere, and adding risk-based surcharges.
Education contacts noted that the ability to place graduates seeking work has improved. Stories abound regarding difficult-to-fill positions (truck drivers, IT, accounting, etc.), and reports of a willingness to increase starting salaries are mixed. Generally, there were few reports of wage pressures mounting (outside of the trucking industry). The news on input prices remains relatively quiet.
Our contacts noted that qualified mortgage rules—and regulations more generally—have the potential to affect the housing recovery. A mortgage and refinance company has cut the majority of its workforce as refinance volume diminishes but noted that current regulations are making first mortgages, especially to the self-employed, “nearly impossible” to issue. Two other small-banking contacts indicated they have discontinued providing residential mortgages. However, two residential real estate contacts did not indicate any major concern about clients’ abilities to obtain mortgage loans.
At the April meeting of the board of directors of the Jacksonville Branch, we asked board members whether the current and near-term environment reflects an economy that is growing at a 2 percent rate or one that is growing at 3 percent. The majority view activity now and in the coming year to be more closely aligned with a 3 percent growth rate. The board members feel that the biggest potential impediment to growth is related to the consumer, as many people continue to struggle and consumer confidence remains lower than before the recession (see the chart).
The old proverb goes, “No matter how long the winter, spring is sure to follow.” One could apply this adage to the Great Recession and the long recovery and ask: Has an economic “spring” finally sprung? We’ll be keeping tabs as the year plays out.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
TrackBack URL for this entry:
Listed below are links to blogs that reference Is Florida Finally Beginning to Flourish Again?:
Beige Book: Southeast Growing at a Moderate Pace
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. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.
Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:
- National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
- Boston: Economic activity continues to expand in the First District.
- New York: Economic growth in the Second District has continued at a moderate pace since the last report.
- Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
- Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
- Richmond: The District economy expanded moderately in recent weeks.
- Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
- Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
- St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
- Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
- Kansas City: The Tenth District economy continued to grow modestly in November.
- Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
- San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.
As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.
Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.
Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.
Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.
The next Beige Book will be published January 15.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Beige Book: Southeast Growing at a Moderate Pace:
Candid Conversations with Bankers
The Atlanta Fed plays an important part in all three of the Federal Reserve System's three main functions: monetary policymaking, bank supervision and regulation, and the operation of a nationwide payments system. Bankers have insight into all three of these functions, so we reach out to financial institutions to help us assess current economic conditions, issues in the regulatory arena, and developments in the payments system.
The Atlanta Fed recently hosted two outreach forums to engage bankers in a frank dialogue about issues in all three of these essential areas of focus. On August 28, Atlanta Fed President Dennis Lockhart led a conversation with 67 bankers from Tampa and surrounding areas. Also in attendance was Drew Breakspear from the state's Office of Financial Regulation, and Alex Sanchez, CEO of the Florida Bankers Association. Discussions were facilitated by an objective third party, Alex Hager, shareholder in the Financial Institution Advisory Group of the accounting firm of Saltmarsh, Cleveland, and Gund.
A similar event was held in Birmingham on September 20, with 39 bankers attending. Trabo Reed, Deputy Banking Superintendent, Alabama State Banking Department, also participated. Facilitating that meeting was H. Hampton "Hamp" Boles, partner, Balch & Bingham LLP. (Mr. Boles also serves as general counsel to the Alabama Bankers Association.) Officials from the Atlanta Fed's Research, Supervision and Regulation, and Financial Services departments participated in these outreach events as well.
To help get the conversation started, attendees at each location participated in some real-time, electronic polling that revealed varying opinions about the current state of banking. The charts below, showing the combined poll results of both meetings, offer a sample of the topics discussed.
The majority of bankers present at both meetings characterized banking conditions in their state as "fair" or "good," although the Alabama bankers were somewhat more positive in their responses than the Florida participants. Among the challenges facing the banking industry, participants cited margin pressures and regulatory compliance costs as the most significant. Below is a broad summary of what we heard in our conversations:
- Attendees reported that there is ample liquidity, and most institutions are actively looking for C&I and small business lending opportunities.
- Growth in its customer base is largely being driven by gains in market share rather than organic growth. The competitive environment was described as "intense."
- Margins remain tight and are affected by the low interest rate environment.
- Regarding growth of fee income, most banks are trying to grow revenues from existing lines of business.
- Higher regulatory burdens are affecting costs and are influential in driving consolidation; there is little confidence among most bankers that there will be any substantial legislative relief from regulations.
- Banks are seeing growth in consumer lending, especially in the auto segment. Credit card activity is regaining ground.
- Most participants see qualified mortgages (QM) and qualified residential mortgages (QRM) as likely having significant impact on banks making mortgage loans, although admittedly there seem to be more questions than answers on the subject. Bankers also expressed concerns over how QMs and QRMs will affect Community Reinvestment Act loans.
- Distributed denial of service attacks was one of many cyber security issues on participants' minds.
By Sarah Arteaga and Teri Gafford, Regional Economic Information Network directors for the Atlanta Fed's Jacksonville and Birmingham branches, respectively
TrackBack URL for this entry:
Listed below are links to blogs that reference Candid Conversations with Bankers:
- Southeastern Transportation: Tapping the Brakes?
- Southeast Manufacturing Slows in August
- It's Mostly Sunny in Florida
- Auto Manufacturing an Economic Boon for Tennessee
- Southeast Manufacturing Rebounded in June
- Southeast Manufacturing Dips in May
- Assessing the Impact of Oil Price Declines on Louisiana's Economy
- Seeking the Slack
- Middle Tennessee Consumer Confidence on the Rise
- Trials and Tribulations in Transportation
- November 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- Banks and banking
- Beige Book
- Business Cycles
- Commodity Prices
- Consumer Savings
- Data Releases
- Disaster recovery
- Economic conditions
- Economic Growth and Development
- Economic Indicators
- Fiscal Policy
- Gulf Coast
- Health Care
- Holiday Sales
- Labor Markets
- Local Economic Analysis and Research Network (LEARN)
- Monetary Policy
- Natural Disasters
- New Orleans
- Oil Spill
- Real Estate
- Sales Tax