Regional Update (January-March 1998)

Index The State of the States Views from the Region Southeastern Manufacturing Survey Southeastern Economic Indicators

Cover Story - How Will the Asian Financial Crisis Affect the Southeast?

Defense Contractors in the Region Respond to Military Spending Cuts

Views from the Region

T he Federal Reserve Bank of Atlanta periodically polls business representatives throughout the Southeast about their opinions on economic trends, and their observations are published in the Fed's Beigebook. In the Beigebook issued Jan. 21, business representatives' comments suggested that the regional economic picture continues its moderate expansion. Here is a summary of their views.

Consumer Spending

  • Most retailers reported that December 1997 sales exceeded year-ago levels. Many merchants, however, reported that sales were lower than expected.
  • Reports indicated that high-end retailers and small specialty stores experienced a strong holiday season. Competition was intense and resulted in significant discounting by many retailers. Because retailers took a cautious approach, most reported inventories were close to targets.
Construction
  • Builders reported that December 1997 new home sales were flat or down compared to the previous year. Inventories in some market segments seemed high.
  • Builders anticipated that the pace of construction in the first quarter of 1998 would be similar to the fourth quarter of 1997. Most realtors expected home sales to at least meet 1997's levels, both in the first quarter of 1998 and for the remainder of the year.
  • Office and industrial construction was dominated by build-to-suit projects. Speculative development, however, is becoming more widespread.
Manufacturing
  • Contacts reported that the economy in certain areas of Alabama is surprisingly good despite apparel job losses. New and expanding firms have largely absorbed the labor supply.
  • New Orleans contacts noted that optimism remains high in the oil and gas sector, where equipment fabrication and manufacturing bookings remained strong.
  • Georgia reports indicated falling orders and shrinking factory workweeks for apparel producers and decreasing factory payrolls and employment for some producers of consumer electronics and appliances. New orders increased for fabricated metal product manufacturers.
Tourism and Business Travel
  • The tourism and hospitality industries continue to perform well, particularly at central Florida theme parks, where several expansions are under way. In Miami and Palm Beach, tourism continues to set records. Hotel and motel bookings through March are reportedly ahead of last year's for the same period.
  • In Louisiana, casino boat revenues in Baton Rouge were up by double-digits margins from a year ago.
Financial Services
  • Overall loan demand in the Southeast grew moderately at the end of 1997 into 1998. Consumer loan demand increased slightly, while commercial lending remained strong. Mortgage loan demand continued to grow.
Wages and Prices
  • Reports of labor shortages continued in parts of the Southeast, but wage pressures were held in check.
  • In New Orleans, shipbuilders began seeking permission to hire foreign workers to fill their need for workers. Nashville contacts reported a shortage of labor for all major trade contractor categories. Also in Nashville, trucking executives reported that the continued driver shortage is constraining growth. One company idled over 10 percent of its equipment because of the labor shortage.
  • Prices for materials declined for some manufacturers. Fierce competition reportedly held down price increases for finished goods.

The full text of the Beigebook is available on the Internet by clicking here.