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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.


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Logistics in the Southeast

(Note: This post is the first part of a two-part discussion of freight and logistics in the Southeast and beyond.)

The Jacksonville Branch of the Atlanta Fed regularly convenes an advisory council on trade and transportation. This council has existed since 2008 and is made up of industry leaders and experts from throughout the Sixth District. Members of this group have provided input to the Atlanta Fed, giving insight into this key component of the nation's economy, which has influenced forecasting and policy decisions. The "boots on the ground" intelligence we receive is also extremely useful in our contributions to the Beige Book on trade, transportation, and logistics issues.

I recently had the opportunity to participate in two conferences focused on challenges and opportunities in this business sector. The first, "Freight in the Southeast—Moving Our Region's Business," was coordinated by the Institute for Trade and Transportation Studies. I encourage you to visit the institute's website and get to know its executive director, Bruce Lambert. The institute's current membership includes the departments of transportation from states in the Sixth District (Florida, Georgia, Alabama, Tennessee, Mississippi, and Louisiana) as well as Arkansas, Kentucky, North Carolina, South Carolina, Virginia, and Puerto Rico. Its mission is to provide research data and expert opinions to its members concerning the effects of commercial freight movements on domestic and international activities as they relate to safety, infrastructure, and transportation.

The conference featured thought-provoking discussions on various topics affecting the industry and the economy more broadly. Examples include discussions on freight-planning activities at the state, regional, and national levels; managing today's and tomorrow's freight corridors, including the challenge of congestion; and trends in logistics and delivery. While participants agreed with one another on many points, there was healthy debate on a number of issues as well, including regulatory changes, particularly in the trucking industry; how to obtain funds needed for various infrastructure projects in both the short and long term; the intense competition among East Coast and Sixth District port authorities for limited federal and state dollars to fund port improvements; and dredging ports in anticipation of larger ships bringing goods to the Gulf and East Coast via the expanded Panama Canal.

Discussions on the state of the economy were also common; there was a consensus among participants that there is a pick-up in their industry and a level of confidence that has not been observed since the recession began. (In a recent post, SouthPoint focused on improving consumer confidence.) However, one presenter reminded us that "strengthening does not mean strong," alluding to improvement as compared with subpar performance in prior periods. Headwinds exist, but positive momentum appears to be building (and this momentum comes in a sector that touches just about every part of the U.S., if not the world, economy).

If there was any overarching theme, it was that collaboration is required to deal with both the challenges facing the sector as well as the opportunities presented. Participants seemed eager to work together to push the industry and the economy forward. I tip my hat to Bruce for coordinating this important conference and encourage readers to learn more. Next time, I'll share some insights from the Retail Industry Leaders Association 2011 Logistics Conference.

By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive

February 25, 2011 in Transportation | Permalink


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Southeast housing update: Recent Atlanta Fed poll shows home sales up in January

The Federal Reserve of Atlanta's monthly poll of regional residential real estate brokers indicated that home sales continued to improve in January. Southeastern broker reports indicated that sales in January rose slightly ahead of the year-earlier level. The majority of brokers reported that sales were flat to slightly up in January. Some contacts in Alabama and Tennessee reported that winter storms dampened January sales.

Gains among Southeastern brokers were largely driven by Florida brokers—more than half in that state reported year-over-year gains.

Some early reports on January sales activity from around the region confirm gains among Florida markets while reports from Tennessee contacts were mixed.

January 2011 Home Sales, Year-Over-Year Percent Change
Northeast Florida Association of Realtors     7.8
Orlando Regional Realtors Association     7.1
Greater Nashville Association of Realtors     6.6
Knoxville Area Association of Realtors –13.6
Source: FRBA business contact poll

Contacts from across the region continue to report downward pressure on home prices from short-sales, real-estate-owned sales, and pending foreclosures. Two-thirds of brokers and nearly half of builders reported annual home price declines in January. Distressed property sales appear to be a driver of home sales in Florida markets, particularly in the condominium market. The Orlando Regional Realtors Association reported that 75 percent of January home sales were distressed sales. Orlando condominium sales increased 26 percent from a year earlier, with condos priced under $50,000 accounting for more than half of sales. Similarly, the Northeast Florida Association of Realtors reported that lender-mediated or distressed sales accounted for 59 percent of sales in January, a new high.

Southeastern homebuilders reported that they were unable to raise home prices despite rising material costs.

Despite the absence of a housing stimulus that was in place last year, the overall outlook among Southeastern brokers continued to improve in January, while close to half of builders expect flat sales over the next several months.

Note: January poll results are based on responses from 105 residential brokers and 49 homebuilders and were collected February 7–16, 2011.

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

February 23, 2011 in Florida, Housing, Tennessee | Permalink


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Florida a key driver of regional home sale gains

In his January 31 speech in Miami, Atlanta Fed President Dennis Lockhart shared his thoughts on the economic outlook. While positive, he acknowledged some risk factors, or headwinds, that can act as a brake on growth.

"There are risk factors that I think bear careful watching.... The weakness of the U.S. housing sector—particularly house prices—could reemerge as a major drag on consumer spending over and above the direct effect of slow construction activity."

This risk bears watching in the Southeast. Some recent information appears to show that conditions may be slowly improving.

After falling sharply during the third quarter, existing home sales in the Southeast rebounded somewhat during the fourth quarter, up 13 percent from the prior quarter and similar to the national trend, according to data from the National Association of Realtors (see chart 1). The regional increase in sales was driven largely by Florida, where sales increased 20 percent in the fourth quarter compared with the prior quarter. Data from Florida Realtors indicate that condominium home sales in particular boosted existing home sales.

Chart 1

A look at annual existing home sales indicates that the Florida housing market outperformed others in the Southeast. In 2010, Florida and Mississippi were the only states to beat their 2009 sales levels, up 11 percent and 2 percent, respectively. Overall, existing home sales in the region grew 2 percent. Weakness was most pronounced in Georgia, where existing home sales declined 7 percent. Nationally, annual home sales declined 5 percent, while declines were a bit more pronounced in Alabama, Louisiana, and Tennessee (see chart 2).

Chart 2

Monthly home price measures from CoreLogic, which include distressed property sales, indicated that home prices in the Southeast continued to weaken on a year-over-year basis through the end of 2010 (see chart 3). Weakness was most pronounced in Alabama and Florida.

Chart 3

It appears that the Florida housing market hit bottom in terms of sales in 2008 and has improved since then, while home prices there have continued to weaken, perhaps even driving sales gains. Elsewhere in the region, the housing market continues to bounce along the bottom in terms of sales.

For more information about real estate and construction in the region, see the Data and Analysis page on the REIN section of the Atlanta Fed's website.

By Whitney Mancuso, a senior analyst in the Atlanta Fed's research department

February 14, 2011 in Housing | Permalink


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According to Calculated Risk and others, the NAR data is overstated. See here:

Posted by: JFV | 02/22/2011 at 01:05 PM

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Regional input cost, manufacturing indicators rise in January

The Econometrics Center at Kennesaw State University released its monthly Purchasing Managers' Index (PMI) report on manufacturers across the Sixth District this week. In January, the Southeast PMI continued its upward trend as Sixth District manufacturers hinted at a slightly brighter current economic picture and expressed an improving outlook.

Rising input costs were also reflected in the Southeast PMI's Commodity Prices component, which read 82.3 in January. Yet, as the Atlanta Fed's most recent Beige Book contribution noted:

"A majority of business contacts indicated that current cost pressures remained high, citing increasing material prices and rising labor and benefits outlays. However, most firms remained reluctant to pass input cost increases through to consumers given intense competitive pressures."

Atlanta Fed President Dennis Lockhart discussed the topic in his recent speech in Anniston, Ala.:

"And because movements of commodity and other 'headline' prices seem to be creating the impression in the popular consciousness of a growing inflation problem, I would like to give particular attention today to inflation."

Speaking specifically about his view on inflation, President Lockhart noted:

"What we're searching for is the underlying inflation trend that the FOMC [Federal Open Market Committee] statement talks about and which we want to control. And since an exact fix on the state of inflation is elusive in the short run, the best policy approach, in my opinion, is to pursue a low, but positive rate of inflation over the longer term. As a policymaker, I think of the desirable level of inflation as high enough to provide a cushion of safety against the risk of tipping into deflation but low enough to be largely irrelevant—not a consideration—in long-term decision making. For me, this number is around 2 percent.

"Notwithstanding the energy-driven jump in prices in December, underlying inflation is currently below the level that I would define as price stability. My current projection shows underlying inflation gradually rising over the next few years, putting us back into a range consistent with the 2 percent target by 2013. Key to the realization of this inflation forecast is that inflation expectations of the public remain well anchored. And for this to happen, the public has to have a good appreciation of what the central bank is trying to achieve and have adequate faith that we will achieve it."

On manufacturing
The overall Southeast PMI as measured by our friends at KSU increased 2.5 points in January, putting the index at 58.9. The national PMI gained just a little less than the regional PMI in January (rising 2.3 points) to reach 60.8.


Both the regional and national indicators have taken a relatively sharp upward turn over the last couple of months, but the Southeast PMI remains on the heels of the national PMI, in their aggregate forms and in most underlying variables.

Though it continues to lag behind the national measure, the new orders index for manufacturers in the Southeast has seen significant upticks over the last few months. As new orders are a leading indicator, this upward movement is encouraging for future production levels. Also noted in the latest report, 63 percent of survey participants across the Southeast said they had plans to increase production levels in the next three to six months, up from 54 percent reporting plans to increase near-term production in December 2010.

Several other Federal Reserve Banks produce monthly manufacturing surveys that yielded similar results as the KSU PMI survey for January. Higher aggregate indices and particularly higher levels of new orders were noticed in the New York Fed's Empire State manufacturing survey (where data is indexed to 0 instead of 50), and the Philadelphia Fed's manufacturing survey, where the new orders index jumped 13 points. Future expectations for new orders were also higher in most regional surveys. Half of respondents in the Kansas City Fed's manufacturing survey indicated they expect new orders to continue increasing over the next six months.

Photo of Michael ChrisztBy Mike Chriszt, an assistant vice president in the Atlanta Fed's research department,

Photo of Mark CarterMark Carter, an Atlanta Fed research analyst

February 9, 2011 in Inflation, Manufacturing, Prices, Southeast | Permalink


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Confidence improving in the region

My friends often ask me when things are going to get better. While I enjoy pretty much any discussion about the region, it's been difficult to explain that the economy is recovering despite persistently high unemployment and what has been an overall dearth of measurable confidence in what I hear from my friends and what we have heard from our business contacts throughout the Southeast. Just this past weekend, one of my friends shared that his business was picking up and he was feeling better about things. It's part of a larger theme we've been picking up on recently.

Atlanta Fed President Dennis Lockhart spoke earlier this week at Miami-Dade College. In this speech, "Functions of the Fed and the Current Economic Situation," he noted an increase in confidence throughout the region.

"Confidence appears to be growing. According to the Conference Board, consumer confidence rose sharply in January. Business confidence is also building. Business leaders remain cautious regarding investment and hiring, but in my contacts with businesspeople across a range of industries I hear more optimism than I heard even a few weeks ago. I believe that as businesses become more assured that growth will continue and their revenues will grow, they will increase investment and hiring."

As I noted above, throughout the economic recovery we detected an absence of confidence with regard to the outlook. We identified this uncertainty as an important headwind to a durable and sustainable recovery. Improving attitudes about the future could be an important, positive influence on the overall economic outlook.

In addition to economic intelligence President Lockhart gathers through the Bank's Regional Economic Information Network, we review what researchers at universities throughout the region are reporting. Recent reports from our Local Economic Analysis and Research Network (LEARN) seem to support what our network of business contacts is telling us.

Florida's January consumer confidence index showed an impressive increase in January. Dr. Chris McCarty, the survey director, writes that:

"Consumer confidence among Floridians soared in January up seven points to 77 from the revised December index of 70. ... The size of this increase in confidence among Floridians was not expected. Confidence among Floridians had been mired in the low 70s for the past few months, consistent with other economic indicators that characterize the Florida economy. This rise is unusual given the University of Michigan's preliminary reading for U.S. consumer sentiment which declined in January..."

Middle Tennessee State University's Office of Consumer Research reports on consumer confidence in the Middle Tennessee area. In their December publication, Dr. Timothy Graeff writes that:

"On the positive side, consumers feel slightly better about the current economy. The current situation index rose modestly to -90 from -93. The percent who said that business conditions in the country as a whole are 'good' gained only slightly to 7 from 5, but the percent who said that business conditions are 'bad' dropped to 34 from 41."

(As an aside and a plug for our friends at MTSU's Business & Economic Research Center, see their heat maps of Tennessee's employment picture. They also provide similar maps for major state metro areas, including Nashville.)

The University of Alabama's Center for Business and Economic Research recently released their first quarter 2011 Alabama Business Confidence Index (ABCI). Dr. Sam Addy, center director, discussed the latest reading during his presentation of the Alabama Outlook. The first quarter ABCI report notes that:

"Alabama business executives are generally feeling optimistic about prospects for the economy and for their industries as 2011 gets underway. The Alabama Business Confidence IndexTM (ABCI) rose 7.1 points to 55.0, indicating that the recovery will be on firm ground in the first quarter. ABCI is approaching its pre-recession reading of 56.8 recorded in the third quarter of 2007."

Mississippi's Business is a publication from the Mississippi Institutions of Higher Learning Department of Forecast and Analysis. They produce coincident and leading indicators for the state. In their latest report, Dr. Darrin Webb writes that:

"The Mississippi Index of Leading Indicators rose 1.2 percent to 97.5 in November. The index has risen for three consecutive months. The growth relative to the level six-months prior turned positive in November. The gain was small, but is a welcomed departure from five months of decline."

President Lockhart concluded his remarks in Miami by noting that while consumer and business confidence appears to be growing, he believes overstatement of the likely speed of improvement should be avoided:

"There are definitely hopeful signs of sustained recovery in 2011. That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels. Progress is real, but fitful, and support of accommodative Fed policy is still required, in my view. The appropriate outlook at this juncture is one of cautious optimism, avoiding overstatement of the likely speed of improvement."

I'm going to share these positive insights with my friend. While I'll note we're cautious when citing the improvement in confidence, I should also note that he is also the manager of my daughter's softball team. I think I may be able to parlay this into more playing time for my kid.

Photo of Michael ChrisztBy Michael Chriszt
Assistant vice president in the Atlanta Fed research department

February 2, 2011 in Economic Indicators, Outlook | Permalink


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