04/25/2013
Beige Book: Southeast, U.S. Exhibiting Similar Trends
The Summary of Commentary on Current Economic Conditions by Federal Reserve District—commonly known as the Beige Book—is a report is published by the Federal Reserve eight times a year. Each Reserve Bank 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. The Beige Book summarizes this information by District and sector.
Below is a comparison of the national summary and the Atlanta Fed's portion of the report, which was released on April 17:
Overall economic conditions
- National: Reports from the 12 Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April.
- Atlanta: Sixth District business contacts reported that economic activity continued to advance at a modest pace.
Outlook
- National: Outlooks among respondents remained optimistic across sectors and Districts, with growth mostly expected to continue at the same or a slightly improved pace.
- Atlanta: Reports across sectors were generally positive, and expectations for the coming months remained optimistic.
Consumer Spending
- National: Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth.
- Atlanta: Retail reports were mixed, with some retailers citing improved sales and others feeling the pinch from a constrained consumer.
Tourism
- National: Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
- Atlanta: Hospitality contacts reported healthy activity in both leisure and business travel.
Real estate
- National: Most Districts said residential and commercial real estate improved markedly since the last report. Home prices were rising in many areas of the country.
- Atlanta: Homebuilders and brokers experienced further improvements in sales and prices of new and existing homes, and inventories continued to decline on a year-over-year basis. Commercial contractors noted a strong year to date as construction levels improved from late last year.
Manufacturing
- National: Most Districts noted increases in manufacturing activity since the previous report.
- Atlanta: Overall, manufacturing activity remained positive as new orders and production increased.
Banking
- National: Loan demand was steady to slightly up in most Districts.
- Atlanta: Loan demand remained steady, according to bankers.
Employment
- National: Employment conditions remained unchanged or improved somewhat.
- Atlanta: Payrolls continued to grow at a tepid pace as firms remained reluctant in hiring, in part because of uncertainty over fiscal policy and health care reform.
Prices
- National: Aside from reports of increases in home prices and residential construction materials, price pressures remained mostly subdued across Districts.
- Atlanta: Prices remained stable and most firms continued to report having relatively little pricing power.
Based on these comparisons, the southeastern economy appears to exhibit trends similar to the rest of the nation.
The next Beige Book will be published June 5.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department
April 25, 2013 in Beige Book, Economic Growth and Development, Employment, Manufacturing, Prices, Real Estate | Permalink
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04/04/2013
Commercial Real Estate Gains Traction
The commercial construction market is warming up, according to participants in our latest commercial construction business contact poll and recent conversations with REIN (Regional Economic Information Network) business contacts in this sector. Our commercial construction poll surveys southeastern builders and lenders on a quarterly basis to keep us informed on changing conditions relating to activity, backlog, labor and material costs, hiring, availability of capital, and future expectations. In this SouthPoint post, we’re highlighting the poll results and comments from conversations with other business contacts that I found to be most telling.
Survey participants indicated that nonresidential construction activity, measured in square feet, is up slightly on both a quarter-over-quarter and a year-over-year basis (see the chart).
To elaborate on that observation, conversations with business contacts revealed that shelved plans are now being revisited, confidence is improving, and some degree of pent-up demand is being released. This renewed interest in commercial construction is reflected in the American Institute of Architects’ architecture billings index, which many analysts view as a leading indicator of future nonresidential construction activity. All categories—total, commercial/industrial, institutional, and mixed—have index scores above 50, signaling an increase in billings now and likely an increase in construction activity six months from now (see the chart).
Interestingly, conversations with several business contacts indicated that margins on recent bids have been extremely narrow. They suggested that this narrowness is driven, at least in part, by increased competition and fee compression. Several noted that they expect margins to increase as construction activity picks up.
Most survey participants indicated that there has been a slight increase in construction material costs, a finding that was supported by conversations with business contacts (see the chart).
The majority of survey participants indicated that the amount of available credit fell short of demand, though more participants indicated that the amount of available credit exceeded demand than did so in our previous poll (see the chart). A handful of comments, both in the survey and from discussions with business contacts, stressed that financing is available for the right type of projects that bring the appropriate amount of equity to the table and have sponsors with proven track records. Conversations with business contacts also revealed that private equity is returning to the market and serves as an alternate source of capital.
Commercial contractors expressed a willingness to add modestly to their employment levels over the next several months, a willingness that was not present at the end of last year, the survey revealed (see the chart). Conversations with business contacts echoed this sentiment. While some still have some propensity to move talent around the company or maximize efficiencies with technology (or both), more business contacts have begun to indicate that it now makes sense to add new employees.
Overall, our survey and conversations with business contacts showed that 2013 is off to a solid start, and commercial real estate markets should continue to improve as the year progresses.
By Jessica Dill, a senior economic research analyst in the Atlanta Fed’s research department
April 4, 2013 in Construction, Economic Growth and Development, Employment, Housing, Real Estate, Southeast | Permalink
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01/23/2013
Southeast Housing Update: Homes Sales Rise, Inventory Levels Fall
Southeastern housing contacts ended on a positive note in 2012. The majority of brokers and home builders indicated that sales were ahead of the year-earlier level. A third of brokers reported that sales were up significantly, and a third indicated more modest increases in December compared with a year earlier (see the chart). Half of builders said new home sales were up slightly on a year-over-year basis.
Brokers and builders indicated that home inventories remained below the year-earlier level in December (see the chart).
Once again, broker comments indicated that listing inventories are very low in many parts of the Southeast, restraining sales. A look at listing inventories around the region confirms that inventories continued to decline in December (see the chart).
More than two-thirds of contacts reported that home prices rose in December, indicating that prices increased slightly compared with a year earlier (see the chart).
Two-thirds of southeastern home builders reported that construction activity in December was ahead of the year-earlier level (see the chart), and close to three-fourths anticipate that construction activity will be ahead of the year-earlier level over the next several months.
On the labor front, reports from southeastern home builders suggested that the average number of hours worked by their employees during the fourth quarter of 2012 was slightly ahead of the year-earlier level, and the outlook for the first quarter of 2013 also suggested a slight increase in average workweek hours (see the chart). Most builders reported that wages were flat or up slightly, 1 percent to 3 percent, on a year-over-year basis.
Contacts indicated that buyer traffic remained strong in December and reports on activity in early January were encouraging (see the chart). Most continue to expect modest home sales growth over the next several months.
Note: December poll results are based on responses from 68 residential brokers and 33 homebuilders and were collected January 7–16, 2013. 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 while negative values indicate decreased activity.
By Whitney Mancuso, a senior analyst in the Atlanta Fed's research department
January 23, 2013 in Housing, Real Estate | Permalink
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01/04/2013
Southeast Commercial Construction Activity Continues to Gain Traction Slowly
Reports from District commercial contractors indicated that the pace of nonresidential construction activity improved modestly from the third to fourth quarter 2012 and was also ahead of the year-earlier level. Some contacts indicated that, despite a noticeable improvement, the overall level of construction activity was still low.
Several contacts noted that construction activity on data centers, high-tech and specialty office buildings, and higher education buildings had increased but that retail construction was still rather limited.
Contractors continued to report that apartment development was particularly strong. More than three-quarters noted that they saw more multifamily construction activity in the fourth quarter of 2012 than one year earlier, and nearly three-quarters noted that multifamily construction activity had increased modestly since the third quarter of 2012.
Interestingly, several business contacts noted that fewer specialty contractors are around and that margins for surviving subcontractors have been restored to prerecession levels after they’ve weathered several lean years. Given this development, contractors do not expect there to be much upward movement in margins going forward.
The pipeline for commercial construction at the end of the fourth quarter was greater than the year-earlier level, by most accounts. One contact’s firm had a 20 percent higher backlog of work going into 2013 than it did going into 2012.
Several contacts noted that they have enough backlog to justify developing additional management teams, though nearly half of the business contacts polled indicated that they did not expect to increase their number of employees between the fourth quarter of 2012 and the first quarter of 2013.
Though one-third of all contacts indicated that they plan to increase hiring over the next three months, many definitely noted that some positions will be easier to fill than others. Several contacts pointed out that construction management skills are in short supply and that competition for these skilled laborers has driven up entry-level offers. One reason cited for this particular shortage is that academic institutions have not been turning out as many grads from construction programs. Outside of construction management, several contractors noted that some crafts are in short supply of laborers. Beyond these constraints, general construction labor remains quite plentiful.
With that said, the majority of contacts noted that they have seen no change in the difficulty of filling positions.
Most contacts said that commercial construction development finance fell short of demand, though comments ran the spectrum.
- A handful of contacts noted that accessing capital is not a problem for them because they fund projects with idle cash. The only reason they would seek financing for a project, they explained, would be as a strategic play to take advantage of cheap long-term debt.
- One contact indicated that its clients still prefer to avoid debt, but noted that banks have recently shown more of an appetite to finance construction projects.
- Another contact noted that access to capital was still very tight for most of the industry. The contact explained that construction management and contractors generally fall into one of two groups of firms. The first group survived the recession and remained current on their obligations. The banks are willing to lend to this group, but the group does not have any substantial need. The second group is just getting by and is anxious for cash flow. This group will not be able to secure a loan for the foreseeable future.
The outlook for 2013 remained positive, as most contacts expected commercial construction activity to be slightly ahead of 2012 levels.
Overall, business contacts continued to anticipate modest but slow improvements in District commercial real estate markets during 2013.
By Jessica Dill
and
Whitney Mancuso, senior analysts in the Atlanta Fed's Research Department
January 4, 2013 in Construction, Real Estate | Permalink
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12/20/2012
Southeast Housing Update: Nov. Home Sales Rise, Modest 2013 Gains Foreseen
Southeastern housing contacts continued to report sales gains in November. The majority of brokers and home builders indicated that sales were slightly ahead of the year-earlier level (see the chart).
Brokers and builders indicated that home inventories remained below the year-earlier level in November. Atlanta Fed broker contacts indicated that listing inventories are low in many parts of the Southeast (see the chart) and held back sales by some accounts:
- An Atlanta broker said, "The trends toward recovery of the housing market may be slowed or stalled by the low inventory. I don't expect to see inventory levels go up until sales prices start to rise significantly."
- According to a Tampa broker, "REO inventory has been extremely low."
- A northeast Florida contact reported that "the months of on-hand inventory continues to decrease and is currently below six months in all areas where I do business. I am experiencing multiple offers on many properties."
- An eastern Tennessee broker stated that "[The] new housing market is stagnant due to no inventory financing for builders. Demand strong, inventory none."
Most contacts continued to report that home prices rose in November and indicated that prices rose modestly compared with a year earlier (see the chart).
Looking ahead to 2013, most southeastern brokers and builders anticipate home sales will increase modestly compared with 2012 levels (see the chart).
Despite expectations of more home sales activity in 2013, most southeastern builders and brokers plan to keep employment levels steady in the first quarter of 2013 compared with fourth quarter 2012 levels (see the chart).
This expectation seems reasonable based on the last few months of employment data for the real estate and construction sectors in the Southeast, as reported by the U.S. Bureau of Labor Statistics (see the chart).
With that said, it is slightly surprising that business contacts do not have expectations for at least modest increases in the number of employees in early 2013. Many industry analysts, including the chief economist of the National Association of Home Builders (who addressed the topic in a recent blog post), have noted that they expect "significant gains in construction sector employment" given the steady increases in home sales, declines in inventory, and stabilization/rise in home prices.
Moreover, the Southeast has been shedding fewer construction jobs over the last few months and has even started to gain some real estate jobs when looking at the year-over-year change in real estate and construction employment numbers (see the chart). This trend suggests that this region might be poised for some gains in real estate and construction employment early next year.
Perhaps the situation with construction employment simply boils down to a comment recently made by a real estate developer contact: "Capacity is lacking in all trades throughout the homebuilding process, which has limited how quickly production can be increased. Such capacity issues are always largest on the front end of the recovery. It is likely that labor will fill in at a quicker pace as the recovery picks up more steam."
Note: November poll results are based on responses from 60 residential brokers and 30 homebuilders and were collected December 3–12, 2012. 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 while negative values indicate decreased activity.
By Whitney Mancuso and
Jessica Dill, senior analysts in the Atlanta Fed's Research Department
December 20, 2012 in Employment, Housing, Real Estate | Permalink
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12/05/2012
Real Estate Recovery along the Panhandle
In early November, staff from the Atlanta Fed's Center for Real Estate Analytics traveled to the Florida Panhandle to meet with local real estate business contacts along the Gulf Coast. Joined by our Regional Economic Information Network (REIN) colleagues from the Jacksonville and New Orleans branches of the Atlanta Fed, we hosted two roundtable discussions: one with residential contacts and one with commercial real estate (CRE) contacts.
The state of residential real estate
When asked to characterize the health of the regional economy, our residential real estate roundtable attendees described the Gulf Coast economy as stable to improving. The majority of our business contacts in the region noted that home prices had hit bottom (see the chart), and they expected home price appreciation to continue to be flat to slightly up through spring 2013. Balanced home inventory levels, fewer distressed properties, more buyer traffic and increasing home sales all contribute to this dynamic, they said.
Move-up buyers account for a good portion of the existing home sales activity in this region, with some contacts reporting that they make up just shy of half of all home buyer traffic (see the chart). Business contacts noted that cash buyers have not discovered the Panhandle yet. They also reported that investors and second home buyers are often considered one and the same in this region and typically hail from Texas, the Midwest, Baltimore, and surrounding Southeast states that are within driving distance.
Interestingly, this homebuyer profile aligns nicely with the poll data that we collected for the Southeast and blogged about back in October.
Reports on housing inventories varied among our panel. Lenders indicated an oversupply and builders noted a shortage, while reports from brokers were mixed.
Larger home builders noted that they are now making money again, and they have moved from a defensive stance to an offensive one. Smaller builders continued to note limited access to finance (see the chart) and explained that those who survived the downturn now either seek capital from individuals with excess cash to lend or have the buyer finance the construction. Builders echoed reports we have heard around the region that lot inventories were undersupplied and that lot development will be slow given that smaller banks do not have much incentive to make new development loans.
Panelists indicated that access to mortgage finance is a bit more challenging than regional reports. With regard to mortgage finance, business contacts noted that appraisals continue to disrupt loan closings and underwriters continue to require more time and documentation to process loans (see the chart). Lenders explained that all loans must “fit in the box.” Additionally, lenders are driven to minimize their exposure to putback risks and position themselves well to comply with current and future regulatory requirements.
Assessing CRE
Our CRE roundtable members also described the Gulf Coast economy as stable to improving. Tourism continued to improve and drive activity in the commercial sector. Retail in particular has benefited from the strong return of travelers to the Gulf. Panelists noted that expanded air service to the region has attracted travelers from outside the Southeast as well. Retail construction has picked up modestly from earlier in the year as has absorption of space (see the chart. Retail rents have begun to firm as well.
Hotel occupancy and revenue continued to improve as well. Panelists noted that bed taxes have increased by double digits along the coast and that there has been strong year-over-year growth. However, they said hotel construction remained at low levels.
Office and industrial markets in the region were described as steady.
The apartment sector was a strong driver for commercial activity in the region during 2012. Coastal Alabama is experiencing some new construction, as are college towns in the Panhandle, such as Tallahassee. Panelists noted that rental rate increases have recently hit the region.
The outlook among the roundtable participants was guardedly optimistic. The panel indicated that commercial real estate conditions would continue to improve in 2013, up slightly from 2012. Retail and the apartment sectors are expected to drive improvements in the region.
By Jessica Dill, a senior analyst in the Atlanta Fed's Center for Real Estate Analytics
and
Whitney Mancuso, a senior analyst in the Atlanta Fed's research department
December 5, 2012 in Florida, Real Estate | Permalink
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10/26/2012
Trading Down and Out: Does This Trend Really Hold for Most Markets?
The latest edition of EconSouth—the Atlanta Fed's quarterly economics and business magazine that examines regional, national, and international topics pertinent to the Southeast—offered quite a focus on the real estate sector.
- The Fed @ Issue column presented a balanced case for optimism and concern about the housing recovery.
- The Regional Economic Information Network (or REIN) section of the issue offered further insight into home price indices in the Data Corner department. Further, interviews with the Atlanta Fed's six regional executives in the On the Ground department homed in on more granular, market-based outlooks for the housing recovery.
- The comeback of the South Florida condominium market was profiled in the article "Does the Return of the Cranes Signal a Housing Revival in South Florida?"
The "Return of the Cranes" article included a brief sidebar titled "Trading Down and Out: A Quick Look at Recent Rental Market Trends." It highlighted a recent trend where, as occupancy rates increase and effective rents rise, multifamily tenants in many markets have begun to move out of Class A properties into Class B properties, Class C properties, or out altogether (and into single-family properties).
Business contacts constantly remind us that real estate is local and stress that conditions vary by market and even submarket. With that in mind, I wondered how multifamily fundamentals for a sampling of markets across the Southeast might stack up. Would a closer look at vacancy rates and asking rents for these markets reveal conditions ripe for tenants to move down or out? If so, would the trend in fundamentals be similar between larger, primary markets and smaller, tertiary markets?
The short answer is yes.
In primary markets across the Southeast, like New Orleans and Jacksonville, the year-over-year percent change calculation shows that vacancy rates in larger markets have indeed been on a downward trajectory (see the chart).
In tertiary markets across the Southeast, like Huntsville and Biloxi-Gulfport, the year-over-year percent change calculation shows that vacancy rates in smaller markets have also been on the decline (see the chart).
Asking rents in primary markets across the Southeast have been on the rise, as reflected by the year-over-year percent change calculation. It is important to note that asking rents are defined as the "advertised rental rates for available space" before rental concessions are taken into consideration (see the chart).
A similar trend holds true for asking rents in tertiary markets across the Southeast (see the chart).
Perhaps not surprisingly, this trend of low vacancy rates and rising rents was echoed by markets large and small across the region. As one might expect, there are occasional outliers to the general trend. While the outliers should serve as an important reminder that real estate is definitely local and conditions do vary between markets, it is reassuring to know that high-level takeaways—for example, multifamily tenants are likely trading down and out due to high occupancy rates/rising rents—hold true for the vast majority of markets.
By Jessica Dill, a senior analyst in the Atlanta Fed's Center for Real Estate Analytics
October 26, 2012 in Real Estate, Southeast | Permalink
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07/31/2012
Prospects for Southeastern Commercial Construction Gain Momentum
As part of our effort to gather economic information, the Atlanta Fed's Center for Real Estate Analytics recently conducted several outreach efforts to help gauge the state of the commercial real estate market in the Southeast. Staff from the Center traveled to Nashville to meet with local real estate industry contacts and discuss recent developments in commercial markets. Contacts included leading commercial real estate management, architects, developers, brokers, and industry analysts.
The overarching theme from attendees was that the Middle Tennessee commercial real estate market has strong fundamentals and was performing well. The market was better positioned than most going into the downturn. Construction remains very limited, and supply is described as "tight" in most submarkets. Contacts stressed, though, that nonresidential construction will soon be needed to spur economic growth; however, access to construction financing remains challenging.
Other notable highlights from discussions with Middle Tennessee contacts:
- Office vacancy was described as low across most submarkets. Brokers reported that prospective tenants have been turned away because of the lack of contiguous vacant space.
- Renewed interest in locating offices in downtown Nashville is taking place.
- There continues to be a growing shift to higher-density office space (shrinking cube space and conference rooms and fewer break rooms) while the demand for more parking spaces continues to grow, especially in suburban markets.
- Reports on retail real estate were similar to national reports; good locations are doing well while marginal locations are struggling.
- Grocery stores are under increasing pressure from large discounters selling groceries, and getting infill tenants remains difficult.
- Hotel construction is strong in the Nashville market, and the outlook is bullish.
- The apartment market occupancy rate is high and rents have risen. A great deal of construction is under way.
The Atlanta Fed also recently concluded a poll of southeastern commercial contractors. Reports indicate that the pace of commercial construction improved from earlier this year and compared with a year earlier (see the chart). Backlogs have risen as well. Material price increases have subsided somewhat from reports earlier this year, while pressure on labor costs appear to be rising.
Most contacts anticipate that commercial construction activity will be flat for the remainder of 2012 on a year-over-year basis. Some suggested that 2012 would be the bottom of the market, with improvements expected next year. The outlook for 2013 is clearly more positive, with most anticipating stronger activity compared with 2012; however, comments indicated that a great deal of uncertainty remains as well.
Overall, both contacts in Middle Tennessee and our poll of southeastern commercial contractors indicate that some positive momentum is occurring that could lead to modest improvements in commercial real estate construction for that area in 2013.
By Whitney Mancuso, a senior economic analyst with the Atlanta Fed's research department
July 31, 2012 in Real Estate, Tennessee | Permalink
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07/27/2012
Positive Housing Trends Seen in Middle Tennessee
Staff associated with the Atlanta Fed's Center for Real Estate Analytics traveled to Nashville last week to meet with local real estate industry contacts and discuss recent developments in housing trends there. Contacts included leading real estate agents, builders, lenders, and appraisers. The positive housing trends that have been witnessed in other markets and reported in previous blog posts were echoed by real estate contacts in Middle Tennessee.
Contacts reported that demand has picked up. Middle Tennessee has seen an increase in sales; the Greater Nashville Association of Realtors reported that home sales were up 24 percent year to date in June. Gains were largely thought to be driven by first- and second-time homebuyers in new construction, move-down buyers looking to purchase smaller and cheaper homes, and investors purchasing distressed properties.
Contacts expect sales will continue to increase throughout 2012. Improvements in Nashville's home sales are thought to be driven by several factors—including the relocation of large firms to the area that will soon begin transferring in their employees—and a sense of urgency by buyers looking to take advantage of the low interest rate environment before house prices appreciate significantly in value.
The inventory of vacant developed lots (VDL) is steadily declining; data provided by Metrostudy reveal that VDL inventory is down 24 percent from its peak in the first quarter of 2010. Our contacts referred to this decline several times, and they expressed concern over builders' and developers' inability to access financing for more new construction.
The inventory of distressed properties is also shrinking. Several contacts reported that distressed inventory has been largely absorbed, a notable improvement from a year earlier. This absorption bodes well for prices, given that distressed properties tend to place downward pressure on house prices in a community. Further, our contacts expect the levels of distressed inventory to continue decreasing over the next six months.
With increasing demand and a shrinking supply of lots and distressed properties, it is no surprise that house prices are slowly starting to appreciate in value. Real estate contacts familiar with the market indicated that house prices have reached a bottom.
And when asked about expectations for house price growth going forward, most contacts expect modest growth to occur.
Again, while these responses represent only a segment of the regional housing market, we read the results as further indication that the housing market is making progress toward recovery.
By Jessica Dill, a senior analyst in the Atlanta Fed's Center for Real Estate Analytics
July 27, 2012 in Housing, Nashville, Real Estate | Permalink
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07/18/2012
Atlanta Fed's Beige Book points to modest growth, rising caution
The Summary of Commentary on Current Economic Conditions by Federal Reserve District—commonly known as the Beige Book—is a report is published by the Federal Reserve eight times per year. Each Federal Reserve Bank 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. The Beige Book summarizes this information by District and sector.
Below is a summary of the Atlanta Fed's July 18 Beige Book:
Summary
- Reports from Sixth District business contacts indicated that economic activity expanded at a modest pace in June and early July. The outlook among most firms remained cautiously optimistic, although the majority of contacts acknowledged that risks were weighted to the downside.
Consumer spending and tourism
- District retail sales activity improved slightly in June and early July, but merchants reported that consumers remained very conservative.
- Tourism activity and business travel remained strong, and the outlook among contacts was positive for the rest of the year.
Real estate and construction
- District residential brokers indicated that home sales were flat to slightly higher compared with year-ago levels. Brokers also reported that the decline in inventories has helped stabilize home prices in many areas. The sales outlook among brokers remained positive with most anticipating continued modest year-over-year home sales gains.
- District homebuilders reported that new home sales and construction rose modestly compared with year-ago levels. Contacts noted that multifamily construction remained robust. The majority indicated that new home inventories declined further on a monthly and an annual basis. In the near term, homebuilders expect sales and construction to post modest gains compared with a year earlier.
Manufacturing and transportation
- Manufacturing contacts indicated that the pace of new orders and production growth remained positive but had moderated.
- According to railroad contacts, intermodal activity continued to strengthen. Double-digit increases in shipments of petroleum products, motor vehicles, and equipment were reported; however, movement of grain, metallic ores, and nonmetallic minerals declined.
Banking and finance
- Banking contacts noted some improvement in residential mortgage lending and auto loans continued to be a source of strength. Commercial and industrial lending remained soft.
Employment
- Regional employment growth remained positive but muted. Employers continued to cite uncertainty regarding future economic conditions as a reason for limiting hiring, and recent economic volatility appears to have exacerbated these anxieties.
- Contacts continued to note difficulty in finding qualified applicants for many highly technical positions. The skills mismatch problem has been especially hard on low-wage individuals, according to community and economic development contacts.
Prices and wages
- Firms responding in June to the Atlanta Fed's Business Inflation Expectations survey reported a decline in unit cost expectations for the second consecutive month. Survey respondents indicated that, on average, they expect labor and material costs to rise 1.7 percent over the next 12 months. That figure is down from 1.8 percent in May and 2.1 percent in April.
- Business contacts reported that lower prices for natural gas and refined oil products were reportedly providing some cost relief. Wage pressures remained modest, although some employers noted that they were increasing starting pay for workers with high-demand skill sets.
Natural resources and agriculture
- Contacts continued to report that investment in expanding and maintaining existing transportation infrastructure would be necessary to accommodate increases in domestic oil and natural gas production.
- Varying levels of drought conditions had expanded through much of the District, resulting in stress to some crops. However, the June tropical storm helped some areas.
The next Beige Book will be published August 29.
By Shalini Patel, a senior economic research analyst in the Atlanta Fed's research department
July 18, 2012 in Agriculture, Beige Book, Business Cycles, Employment, Manufacturing, Real Estate, Tourism | Permalink
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