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09/11/2014

Southeastern Manufacturing: Back in the Fast Lane

If you're a fan of auto racing, you're probably familiar with drivers trying to conserve gas. One mental trick they use when in conservation mode is to accelerate like there is an egg between their foot and the gas pedal. This technique prevents the driver from wasting fuel by accelerating too fast, or too slow. Manufacturing in the Southeast had been easing off the gas pedal the last couple of months, but according to the latest Southeast purchasing managers index (PMI), manufacturing activity recently refueled, and the egg has been tossed out the window. The Southeast PMI, while still expanding, had seen decreases in the overall index during May, June, and July. The August report, released on September 5, indicated that activity reversed course and is now accelerating.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the region. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The Southeast PMI increased to 56.7 points in August, a 5.4 point increase over July (see the chart). The PMI report saw significant gains in a few of the underlying variables:

  • New orders: The new orders subindex increased 11.2 points during July and is now back in expansionary territory. The significant gain in August went a long way in reversing the 14.1 point decline in July.
  • Production: The production subindex also rebounded into expansionary level; increasing 12.1 points from July to August.
  • Employment: The employment subindex fell 3.9 points compared with the previous month. However, employment remained in expansionary territory for the 11th consecutive month, indicating that manufacturers continue to increase payrolls.
  • Supply deliveries: The supplier deliveries subindex fell 1.0 point during August, suggesting that manufacturers are receiving their inputs slightly quicker.
  • Finished inventory: The finished inventories subindex rose 8.4 points compared with July, suggesting that inventory levels are slightly higher than ideal for manufacturers.
  • Commodity prices: Input price pressures changed only slightly, increasing 0.8 points in August to 58.3. The commodity price subindex continues to suggest moderate price pressures in the manufacturing sector.

Southeast_purchasing

When asked for their production expectations during the next three to six months, 44 percent of survey participants expect production to be higher, up from 40 percent in July. Optimism among manufacturing contacts has increased the last couple of months, after falling to 34 percent in June.

It's encouraging to see a pick-up in southeastern manufacturing activity. The national PMI (produced by the Institute for Supply Management) reached 59.0 points in August, its highest level in more than three years. (I should note that the Southeast PMI is not a subset of the national index.) Hopefully, activity in the Southeast can follow suit and continue to rise. It's also good that we got the egg removed from the car. They belong on the breakfast table (scrambled for me, not fried), not on the accelerator.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

September 11, 2014 in Manufacturing, Southeast | Permalink

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08/15/2014

Taking Tennessee's Temperature

During the most recent cycle of the Federal Open Market Committee (which ran from June 19 to July 30), the Atlanta Fed's Regional Economic Information Network (REIN) team at the Nashville Branch met with business leaders, including branch directors, to discuss economic conditions.

General business conditions
Our REIN contacts in Middle and East Tennessee remain optimistic about the prospects for their businesses and the general economy. Most have a positive outlook and report solid growth in customer demand.

Our contacts also indicate that manufacturing is expanding robustly, with the sector running at nearly full capacity, especially the auto industry. A large building-materials manufacturer expects faster growth in the second half of 2014 as the construction industry recovers from the weather-related disruptions earlier in the year. In the Nashville area, both the commercial and residential real estate markets are doing well, benefiting from the low interest rate environment, strong net in-migration, and rising household incomes as the employment picture improves.

Employment and labor markets
Employment growth has accelerated in Tennessee during the past year, and growth momentum is strong across most major metropolitan areas in the state (see the chart).

Tnemployment_momentum

Middle Tennessee State University's Business and Economic Research Center produces a heat map of Tennessee's employment growth by industry (based on U.S. Bureau of Labor Statistics data) that nicely illustrates what we've been hearing from our business contacts: namely, employment in construction, professional and business services, and leisure and hospitality has been outpacing growth in other industries.

As the labor market improves, businesses are increasingly sharing stories about the difficulties companies face in finding qualified workers across a broad skill spectrum. In addition, several companies have expressed concern that replacing skilled employees who are nearing retirement age will be challenging. Consequently, companies appear to be expanding internal training programs to deal with existing and potential skill shortages.

In addition to our meetings with business executives, we polled a number of mostly larger firms to find whether they experienced difficulty filling open positions. Out of 21 respondents, two-thirds said yes. Seventy percent of those respondents said that they have raised offer wages to attract new hires.

We also conducted a brief poll of 32 of our construction industry contacts. On the residential side, 75 percent indicated that it is now more or much more difficult to find skilled labor compared to the mid-2000s. Skilled labor availability is even tighter in commercial real estate—nearly 85 percent of respondents said finding skilled workers now is more difficult.

Costs/prices/wages
We have not heard of any pick-up in materials and other nonlabor input costs but, as mentioned above, the shortage of skilled applicants is putting upward pressure on offer wages. Several manufacturing contacts said that they increased their starting wages along with peer companies in their geographic area.

In the construction industry in particular, labor cost pressures on the residential side have increased compared to the mid-2000s for almost two-thirds of respondents to our poll. Moreover, labor cost pressures have intensified for more than three-fourths of the commercial builders we've polled.

Availability of credit and investments
In the same poll, two-thirds of the homebuilders and residential brokers said it is more or much more difficult to obtain financing for construction projects compared with the mid-2000s. And everyone on that panel said that it is more or much more difficult to obtain financing for land/lot development. Financing conditions are a bit easier for commercial builders (see the chart).

Tnconstruction_poll

One national commercial construction firm said that financing conditions are actually easier for them now than 10 years ago. Notably, equity financing is becoming more prominent in a number of sectors as investors are looking for higher returns than they can get at financial institutions, and banks' lending standards remain rigorous.

All this said, the positive sentiment among our business contacts in Middle and East Tennessee could possibly also signal continued improvement in the health of the national economy, given that the structure of Tennessee's economy for the most part resembles that of the United States' as a whole. Be sure to check back here as we'll periodically update the Middle and East Tennessee economy.


Photo of Galina Alexeenko By Galina Alexeenko, a Regional Economic Information Network director in the Atlanta Fed's Nashville Branch

August 15, 2014 in Economic conditions, Economic Indicators, Economy, Manufacturing, Southeast | Permalink

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08/12/2014

Is Southeastern Manufacturing Leveling Off?

Manufacturing in the Southeast has been relatively strong in 2014. According to the Southeast Purchasing Managers Index (PMI), manufacturing activity expanded every month this year. The latest report, released on August 5, indicated that activity continued to expand in July. However, a couple of important indicators took a large step back from their recent highs.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The Southeast PMI fell 4.0 points in July compared with June, but the overall reading remained above the 50 threshold at 51.3 (see the chart below). July was the third consecutive month the overall index has declined. Some notable aspects from the survey:

  • New orders: The new orders subindex and production subindex decreased significantly last month, declining 14.2 points. The large month-over-month decrease in new orders, while not ideal, is not entirely unusual. During the last three years, the subindex has experienced similar swings during the summer months. For instance, new orders fell 22.6 points during May and June 2012 and 11.7 points in July 2013. Still, the 24.3 point decrease over the last two months is significant.
  • Production: The production subindex fell 8.5 points from June to July, and it historically has followed a similar pattern to new orders, experiencing notable falls during the summer. Meanwhile, factories appear to be increasing payrolls.
  • Employment: The employment subindex rose 1.9 points compared with the previous month.
  • Supply deliveries: The supplier deliveries subindex fell 3.8 points compared with June, suggesting that manufacturers are receiving their inputs slightly quicker.
  • Finished inventory: The finished inventories subindex rose 4.7 points during July, indicating inventory levels are slightly higher.
  • Commodity prices: Input prices fell 0.9 points in July to 57.5, suggesting that moderate price pressures continue.

Se_purchasingmanagers

Manufacturing contacts' optimism remained subdued during July. When asked for their production expectations, 40 percent of survey participants expect production to be higher in the next three to six months. That level is up from June's mark of 34 percent.

So is the stage set for another decrease in August? That's hard to say. During the last few years, manufacturing activity has tended to pull back this time of year. The national PMI, produced by the Institute of Supply Management, hit its highest level in more than three years during July. (I should note that the Southeast PMI is not a subset of the national one). That movement bodes well for the national picture and should help bolster activity in the South. It's always important to remember that although manufacturing activity may be leveling off, it is still expanding overall. So don't fret—enjoy what remains of the summer!

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

August 12, 2014 in Economic conditions, Manufacturing | Permalink

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07/25/2014

Auto Sales Accelerating

"My pappy said 'Son, you're gonna drive me to drinkin' if you don't stop drivin' that hot rod Lincoln.'"
—Charley Ryan, 1958

Automobiles have loomed large in the American experience since Henry Ford's Tin Lizzie—the fabled Model T—first rolled off the assembly line in 1908. Back in the 1940s and 1950s, a favorite pastime of American youth was hot-rodding (or so I've been told by my much, much older siblings). Cars have inspired countless songs, including Charley Ryan's "Hot Rod Lincoln" and "Beep, Beep," a tempo-changing ditty from 1958 about a Nash Rambler and a Cadillac. And in the 1973 movie American Graffiti, who can forget the iconic 1932 Deuce Coupe driven by John Milner or Toad's 1958 Impala? It was all about the cars!

And it appears consumers feel pretty much the same way. The one shining star throughout this recovery in the wake of the Great Recession has been the growth in unit sales of motor vehicles. I think it's safe to say that folks are buying new rides; it's just that simple. Although retail sales have been growing modestly, motor vehicle sales have been one of the driving forces (OK, yes—pun intended) behind the upward movement seen overall.

Light vehicle sales continued rising in June, reaching a postrecession high of 16.9 million units (the seasonally adjusted annual rate; see the chart).

This growth can also been seen when looking at consumer credit outstanding. Consumer credit is debt that a consumer enters into with the intent of making an immediate purchase. There are two types of consumer credit: revolving and nonrevolving. Let's look for a moment at nonrevolving credit, which is defined as an installment loan in which the amount borrowed (plus interest) is repaid at set intervals for the life of the loan. As the chart below shows, nonrevolving credit has been growing over roughly the same period as vehicle sales, which is not surprising when you consider that vehicle loans account for roughly 40 percent of this type of credit.

According to the U.S. Census Bureau, automobile sales declined 0.2 percent in June. However, a year-over-year comparison shows that vehicle sales increased 7.0 percent (see the chart). The consensus among our regional auto dealer contacts have indicated they've seen a steady increase in year-to-date sales and are expecting "sales for the remainder of the year to be fairly robust."

Historically, auto sales fluctuate quite a bit. But as you can see, the chart above supports the claim that vehicle sales have shown strong growth compared with total retail sales since the end of the recession. These data provide insight into consumer spending trends. Although this is just one data series in a long list of economic indicators we follow, I think it's fair to say this one gives a better understanding of consumer behavior.

So we'll keep our eye on this indicator. And remember, "Beep-beep, beep-beep. His horn went beep-beep-beep."

Photo of Chris Viets By Chris Viets, a REIN analyst in the Atlanta Fed's Jacksonville Branch

July 25, 2014 in Automobiles, Manufacturing, Retail, Transportation | Permalink

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07/10/2014

A Southern Slowdown in Manufacturing?

Manufacturing in the Southeast had been thriving in recent months. According to the Southeast Purchasing Managers Index (PMI) report, new orders, production, and employment at regional manufacturers had been strong since March. The latest PMI report, released on July 7, suggests that activity may be slowing down a little bit.

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions for the region in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

The June PMI decreased 4.5 points compared with May. Although still boasting an overall reading of 55.3 points (which is not bad), the new orders and production subindex readings dropped. The new orders subindex fell 10.1 points from May to 59.4, and the production subindex fell 10.8 points to 56.6 compared with the previous period (see the chart). The readings are still firmly in expansion territory, but they don’t have the excitement of the high readings from previous months. The employment subindex also decreased 4.6 points from May’s 55.2. Manufacturing payrolls are still increasing, according to the PMI survey, but fewer companies may be adding employees.

Southeast Purchasing Managers Index

The supplier delivery times subindex increased 1.8 points during the month, suggesting that it is taking a little longer to receive inputs at manufacturing plants. The commodity prices subindex fell 10.0 points compared with May, which could be a sign that price pressures for materials may be easing.

Looking ahead, manufacturing contacts’ optimism concerning future production remains lackluster. When asked for their production expectations, only thirty-four percent of survey participants expect production to be higher in the next three to six months. The percentage of contacts expecting higher production has been falling in recent months.

So, is manufacturing activity slowing? It’s difficult to draw that conclusion over one month’s data. However, the sharp drop in new orders and production is hard to ignore. It’s important to remember that the overall PMI reading is still positive and is in line with June’s national index reading of 55.3 from the Institute for Supply Management. The Southeast PMI indicated that manufacturing activity had been sprinting down the track in recent months. Maybe it needed a breather, or maybe it pulled a hamstring. We’ll have to wait and see.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


July 10, 2014 in Employment, Inventories, Manufacturing, Productivity, Southeast | Permalink

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06/12/2014

Southeast Manufacturing Rides a Wave in May

The most recent Southeast Purchasing Managers Index (PMI) indicated that manufacturing activity continued to expand in May. The latest report, released on June 5, put the overall index at 59.8 points. Although the May index was 3.4 points below April’s 63.2 level, it was still well above the 50-point threshold, indicating expansion in the manufacturing sector.

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions for the region in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

All components of the Southeast PMI decreased during May, but for the most part, only slightly (see the chart):

  • The new orders subindex fell 2.8 points from April but remained a solid 69.6. A high new orders subindex is a good sign that future production activity will be robust.
  • The production subindex fell 0.7 points compared with April, but like new orders, it remained strong with a reading of 67.4. The high production subindex suggests that factories are currently busy, Coupled with the elevated new orders subindex, manufacturing firms stand a good chance of remaining busy in the months to come.
  • The employment subindex declined 0.8 points from April to 63 but still indicates that manufacturing payrolls are increasing.
  • The supplier delivery subindex also suggested strengthening in the sector. While it fell 5.2 points to 57.6, it remains solidly in expansionary territory—an indication that demand for inputs among manufacturers is healthy.

A notable aspect in the PMI report was the responses to the survey question concerning future production. When asked about their production expectations over the next three to six months, only 41 percent of purchasing managers expect production to be higher. That rate is somewhat out of line with the strong new orders numbers we’ve seen, but maybe some underlying elements are dampening purchasing managers’ optimism.

The Southeast PMI has averaged a reading of 61.5 during the last three months. That level represents the strongest three-month average since early 2012. Let’s hope that manufacturing activity can continue to ride the wave and not wipe out this summer.

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


June 12, 2014 in Employment, Inventories, Manufacturing, Productivity, Southeast | Permalink

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06/11/2014

"Army Strong" and Economics

Straddling the Tennessee-Kentucky border, approximately 50 miles northwest of Nashville, sits the United States Army installation, Fort Campbell. The military post occupies about 106,700 acres between the towns of Clarksville, Tennessee, and Hopkinsville, Kentucky.

Ties between the base and the regional community run deep. While spending time in the area, it is hard to miss the patriotic messages in storefront windows, the flags, and the signs supporting the troops who call Fort Campbell home. The fort is of vital importance to the area's pride and economy. Federal Reserve Bank of Atlanta President, Dennis Lockhart, along with the Nashville Branch board of directors, recently had the opportunity to tour the base and see firsthand how important a large military installation can be to a community's welfare.

Atlanta Fed President and the Nashville Branch Board

Fort Campbell is home to the "Screaming Eagles" of the 101st Airborne, the Army's only air assault division and one of the most deployed divisions in the military. Other major units housed at the base include the 5th Special Forces Group, the 160th Special Operations Aviation Regiment, the 52nd Ordinance Group, the U.S. Army Medical Command, Installation Management Command, and Network Enterprise Technology Command. The base boasts the second-largest Army airfield in the continental United States and also has its own railyard, capable of processing 240 railcars.

Fort Campbell operates like a city, with nine schools on the base, several child development centers, a hospital, a movie theater, golf course, restaurants, and even a dog park. According to a 2012 study by the Christian County Chamber of Commerce in Kentucky, the base directly supports nearly a quarter of a million people, including 30,179 active military personnel, 53,116 family members, 151,308 military retirees and their family members, and 9,099 civilian employees.

Through these people, the base is able to contribute to the local economy in a variety of ways. The housing market receives a significant boost, as a high number of soldiers and their family members live off base. They pay local taxes and patronize local businesses, and their children attend local schools. Also, the more than 150,000 retired military personnel and their family members probably wouldn't be living in the community if not for Fort Campbell. A significant number of them also contribute to the local economy in the same way as the active soldiers.

That being said, the annual economic impact in dollars includes $1.8 billion in solider pay, $1.4 billion in retiree pay, $295 million in civilian pay, $386 million in construction expenses, and $219 million in housing allowances.

So, as one would expect, when a large number of soldiers at Fort Campbell are deployed, the local economy feels the sting. Without Fort Campbell and its people, the Clarksville/Hopkinsville metropolitan statistical area would be a shell of itself. If the base suddenly moved from the area, some 80,000 soldiers and family members would be stationed elsewhere. Construction projects would come to a halt. City and county tax revenues would plummet. Everything from restaurants, car washes, and grocery stores would dry up.

The men and women serving our country protect us and keep our nation safe, but they do much more than that. They drive and support local economies. They improve our way of life in ways that go unseen. Economics aside, we say thank you!

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed´s Nashville Branch


June 11, 2014 in Manufacturing | Permalink

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05/15/2014

Southeast PMI Hits a Two-Year High

Last month, I suggested in a SouthPoint post that manufacturing activity in the Southeast could be a lion or a lamb, the outcome depending on a couple of different scenarios. Was the strong March PMI report a result of pent-up activity that was delayed by the unusually severe weather experienced during the winter, or was there strong underlying demand present that would propel manufacturing into the second quarter? Judging by April’s Purchasing Managers Index (PMI) report, there is a strong possibility it was the latter. April’s PMI report indicated that manufacturing activity was robust, and various indicators in the report suggest it could continue.

The Atlanta Fed’s research department uses the Southeast PMI to track manufacturing activity in the region. The survey is produced by the Econometric Center at Kennesaw State University. It analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The Southeastern PMI rose 1.7 points compared with March and reached a two-year high of 63.2. The new orders subindex and production subindex both reached their highest levels since early 2012. New orders increased 2.1 points, and production increased 2.7 points compared with March. The rise in new orders bodes well for future manufacturing activity. When new orders are high, generally future production will also be high. Factories also appear to be hiring. The employment subindex rose 5.2 points compared with the previous month, indicating that manufacturing payrolls increased during April. The more new orders and production rise, the more new workers will likely be needed. The finished inventories subindex fell 7.8 points during April, suggesting that inventory levels are falling, which could also lead to increased manufacturing activity going forward.

At the state level, Alabama, Florida, Georgia, Louisiana, and Tennessee all saw increases in their overall PMI during April and were in expansionary territory (see the chart). The only state not above the 50-point threshold was Mississippi, which just missed with a 49.1.

Southeast Purchasing Managers Index

Using the PMI report as an indicator, manufacturing in the Southeast has been on a nice roll the last couple of months. The Southeast PMI has outperformed the national PMI (it should be noted that the Southeastern PMI is not a subset of the national PMI). March and April reports suggest that activity is growing and solid. We will have to wait and see if the trend continues, but in the meantime, let’s hope for a three-year high in May.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


May 15, 2014 in Economic Indicators, Manufacturing, Productivity, Southeast | Permalink

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05/09/2014

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).

Florida Consumer Confidence

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


May 9, 2014 in Banks and banking, Construction, Economic Growth and Development, Economic Indicators, Florida, Health Care, Housing, Jobs, Manufacturing, Real Estate, Retail | Permalink

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04/16/2014

Beige Book: Warming Economy Accompanies Spring’s Thaw

Eight times a year, each of the 12 Reserve Banks gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. Their findings are reported in the Summary of Economic Conditions, also known as the Beige Book. The report is published on the Federal Reserve Board of Governors' website about two weeks prior to each Federal Open Market Committee meeting.

The first sentences of the national summary and each Bank's report often receive much attention because the lead sentence tends to summarize economic conditions in that region.

Here is a compilation of the first sentence of the national summary and each Reserve Bank’s report:

  • National: Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. (A previous SouthPoint post also mentioned the weather’s effect on overall economic conditions.)
  • Boston: The First District economy continues to expand moderately, according to business contacts, although growth rates vary across sectors and firms.
  • New York: Economic activity in the Second District rebounded since the last report, as the harsh winter weather abated.
  • Philadelphia: Aggregate business activity in the Third District grew at a moderate pace during this current Beige Book period.
  • Cleveland: On balance, economic activity in the Fourth District declined slightly in the past six weeks.
  • Richmond: The Fifth District economy expanded moderately since our last report.
  • Atlanta: On balance, the Sixth District economy expanded at a modest pace from mid-February through March.
  • Chicago: Growth in economic activity in the Seventh District picked up in March, and contacts generally maintained their optimistic outlook for 2014.
  • St. Louis: Business activity in the Eighth District has declined slightly since our previous report.
  • Minneapolis: The Ninth District economy continued to grow at a moderate pace since the last report.
  • Kansas City: The Tenth District economy grew moderately in March, and most contacts were optimistic about future activity.
  • Dallas: The Eleventh District economy grew at a moderate pace over the last six weeks.
  • San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of mid-February through early April.

As you can see, almost all districts are experiencing the same level of economic activity.

Here are some notable highlights from the Atlanta Fed's contribution to the Beige Book:

Consumer spending and tourism

  • District merchants reported an uptick in activity from mid-February through March following sluggish sales in January, which were widely attributed to the severe winter weather. Light motor vehicle sales grew modestly during the time period.
  • Hospitality contacts in areas negatively affected by the adverse winter weather saw improvements in activity.

Real estate and construction

  • Brokers reported home sales were mixed. Inventory levels continued to fall on a year-over-year basis, and the majority of contacts reported that home prices remained ahead of the year-earlier level.
  • The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level. The majority of contacts continued to report 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.

Manufacturing

  • Manufacturers reported increased activity across the region from mid-February through March. Significant improvements were cited in production and new orders.

Banking and finance

  • Bankers noted an increase in loan demand.

Employment

  • District payroll growth remained constrained from mid-February through March.

Prices and wages

  • Nonlabor input costs increased very slowly, with a few noted exceptions, including rising costs for developed land, construction materials, and food. Profit margins remained tight across most industries as contacts continued to report very little pricing power.
  • Contacts continued to indicate little wage pressure outside of some high-skilled positions.

The next Beige Book will be published June 4.

Photo of Teri GaffordBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department


April 16, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Housing, Jobs, Labor Markets, Manufacturing, Prices, Purchasing, Real Estate, Unemployment, Weather | Permalink

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