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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.


August 20, 2015

It's Mostly Sunny in Florida

20130910-0498-jacksonville
Jacksonville, Florida. Photo by Kendrick Disch

In a February SouthPoint post about economic conditions in north and central Florida, we reported that our contacts' optimism in late 2014 had carried into the new year. Since then, the Regional Economic Information Network team at the Jacksonville Branch has noted an overall improvement in activity and continued positive sentiment.

General business conditions continue firming
Feedback throughout the winter months was quite upbeat. Most contacts felt that an improving economy and labor market were driving growth. In early spring, although feedback remained positive, the messages became more mixed, with some contacts indicating a plateau in growth—most notably, transportation and retail contacts cited challenges from severe weather in various markets. However, bankers noted reasonable momentum with consumers and businesses; real estate contacts saw robust activity with increasing sales and prices at all price points; and homebuilders and commercial construction firms noted much stronger levels of activity. Tourism remained vibrant. Though the consumer inched along, restaurants reported revenue increases that they believe were the result of lower gas prices influencing discretionary spending. As spring progressed, activity continued along an upward, albeit slow, trajectory.

By midsummer, a small number of contacts reported demand was flat, and transportation contacts reported that activity—especially related to the movement of energy-related materials—declined notably since the first quarter. However, a majority of other contacts noted improved activity. Some began to add to capacity to meet increased demand—and, more importantly, anticipated future demand.

Employment largely stable
Throughout the first part of 2015, contacts continued to indicate no major problems in filling jobs outside of information technology (IT), accounting, compliance, and truck drivers. Staffing levels across firms generally remained steady, with some adding to headcount. Those hesitant to add staff turned to contingent labor (such as contract staff or temps) to meet demand. In late spring, we began to hear about increased turnover at many levels, and recruiting and retention appeared to be getting tougher. In central Florida, tourism contacts cited concerns of potential worker shortages as a result of a very low regional unemployment rate and increased construction attracting available labor.

Labor, nonlabor costs and price pressure surfacing
By March, mentions of mounting wage pressures at all job levels surfaced. Though not universally reported, numerous contacts said they were beginning to increase starting salaries, which they noted will eventually ripple through higher levels of staff to maintain internal pay equity and retain talent. Wages increased for engineers, truckers and technicians, and IT specialists. Into the summer, stories of referral and signing bonuses, customized perks, and other benefits enhancements for both recruitment and retention became more common.

Feedback on health care costs continued to be mixed. Health care costs for most increased at a pace greater than overall inflation, though companies continued to try to minimize the increases by changing plan designs or by sharing more of the cost with employees.

Overall, concerns about nonlabor costs were muted. Some mentioned lower energy and fuel costs have offset increases in other input costs.

The ability to raise prices varied among industries. However, a number of contacts indicated pricing power had improved, though the magnitude of price increases was limited. Generally, though, margins were edging up.

Credit, investment remain available
Throughout the first half of the year, credit was readily available and banking contacts reported increased activity. Many companies, especially small businesses, continued to deleverage even in the low interest rate environment, and many larger firms reported funding investments internally. Lenders reported increases in mortgage refinances as rates dipped, and they noted improved home equity levels. Auto lending was described as extremely strong.

Almost without exception, retail contacts noted expansion activity and further growth plans, all the result of expectations for stronger consumer spending. Real estate agents indicated that appraisal issues improved, and buyers, even the self-employed, generally faced little trouble financing home purchases. Stories regarding business investment were mixed between outlays for deferred projects and spending for new demand. This year, it's become clear that there is less hesitation about investment.

Business outlook mostly bright
Though we heard a couple of references to a cloudier outlook during the next two to three years as we approach another presidential election, collectively—and as recently as July—most REIN contacts and board members were as positive about current activity and future expectations as we have seen since the recession.

What's is in store for Florida in the second half of the year? Stay tuned.

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both of the Atlanta Fed's Jacksonville Branch

March 12, 2015

Southeast PMI Surges in February

The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.

The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current 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 contracting activity.

The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:

  • The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
  • The production subindex increased 3.5 points over the previous month and now reads 64.6.
  • The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
  • The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
  • The finished inventory subindex increased 5.5 points compared with January.
  • The commodity prices subindex fell 1.7 points and now reads 35.4.

Southeast Purchasing Managers Index

Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.

The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.


February 27, 2015

Through the Eyes of a Big Fan

When Janet Yellen was named chair of the Board of Governors of the Federal Reserve System in February 2014, she became the fourth chair in my 30-year career here at the Atlanta Fed's Jacksonville Branch. While I vaguely remember Chairman Paul Volcker once visiting the branch, I was so new to the Bank and pretty naïve as to what the Fed actually did that I don't think I paid much attention back then. Soon after was Chairman Alan Greenspan, a brilliant man who spoke of economic conditions in a manner admittedly a bit hard for me to understand, especially since my Fed career began in an area not focused primarily on studying the economy. Then along came Chairman Ben Bernanke! Finally, someone who spoke in terms that even I could grasp. Couple his arrival with the creation of the Regional Economic Information Network and my foray into the world of economics (and the need for me to pay closer attention), I became an instant fan! I watched with great interest as Chairman Bernanke and the Federal Open Market Committee dusted off many lesser-known tools (as well as unveiling some brand-new tools) in the Fed's toolbox to help stimulate the economy during and after the Great Recession.

So, imagine my thrill at finding out that Chairman Bernanke was going to be a keynote speaker at this year's National Retail Federation's (NRF) annual conference that I had the great fortune to attend! I was like, whoop whoop! (I know, I'm just a big fan at heart!)

The morning of his appearance, I got up at zero-dark-thirty and was the first in line to enter the massive convention hall where he was scheduled to speak. I made a bee-line to the front and scoped out the best seat in the house. And I waited with anxious anticipation. I was like a teenage girl at her first rock concert when he took the stage. I listened intently as he and the president of Saks Fifth Avenue, who is serving as this year's NRF chairman, discussed the fallout from the global economic crisis and current prospects for the U.S. economy and the retail industry. It was amazing to listen to Bernanke speak in a much more casual manner (since now his comments do not necessarily move markets) about the events of the crisis and the actions taken by the Fed. (Remember, he is a scholar of the Great Depression of the 20th century and understood how the Fed could work to avoid the mistakes of the past.)

In addition to Chairman Bernanke sharing insights about the crisis with the audience, he commented on the transparency of the Federal Reserve System by saying, "In the middle of a crisis explaining where, why, and how we do what we do is as important as taking actions." When asked about the current state of the economy, Bernanke indicated that the U.S. economy is enjoying a genuine recovery. However, he has some concern regarding the European Union, noting that the situation should be watched carefully.

He was then asked what he missed most about being Fed chairman. He said that when he was chairman, he was driven everywhere by his security detail, so little things like traffic and finding parking spaces were never a concern. What he misses most, he said, "is not having to find my own parking spaces." He paused briefly and added, "That's all I miss."

How was I lucky enough to see Chairman Bernanke in person? As I mentioned, this was the NRF's annual conference, and one of my responsibilities as an analyst is to follow the retail sector and consumer behavior. So aside from my thrilling moment as a fan, what other insights did I glean at the conference? Well, when I attended the same conference two years ago, the underlying tone among participants was, "How do we get the consumer back to spending?" This year, the participants were upbeat and the focus seemed to be "We've got the consumer back, but how do we keep them back?" One answer was to create an engaging and exciting shopping experience.

Retailers must have been successful because revolving credit is up and consumer confidence is high. Let's take a look at our consumers and their behavior during the 2014 holiday shopping season.

Consumer credit outstanding rose $14.8 billion in December from $13.5 billion in November (see the chart). Nonrevolving credit, which is made up mostly of auto and student loans, rose $9.0 billion. However, the more noteworthy movement is that revolving credit rose a significant $5.8 billion in December from November's decline of $0.9 billion. In my opinion, this increase indicated the consumer was willing to take on debt previously avoided. Revolving credit, composed primarily of credit card loans, showed its strongest growth in eight months (the chart compares month-over-month data).

Change-in-consumer-credit

The Conference Board's survey on current conditions rose significantly to a seven-year high of 112.6 points in January from December's reading of 99.9. The University of Michigan's index rose to 109.3 points in January from 104.8 in December. The Conference Board's current conditions survey is based on the survey participants' view of current economic conditions as it relates to businesses and jobs, while the University of Michigan's survey is based on the individuals' sentiment as it relates to their personal households (see the chart).

Consumer-confidence-indices

The Conference Board's measure of expectations rose moderately to 96.4 points in January from 88.5 in December. The University of Michigan's index rose to 91.0 points in January from December's reading of 86.4. The expectations surveys by both entities are based on the same views of the survey participants as the current conditions surveys. However, the forward-looking expectations time frame differs. The Conference Board is looking six months out, and the University of Michigan is looking one to five years out (see the chart).

Consumer-confidence-indices-measuring-expectations

It appears, for now, that the consumer is increasingly upbeat, which is vital to the strength of the economy. Several District retail contacts recently reported double-digit growth and record-setting volume in 2014. Casual dining establishments saw an uptick in volume as consumers seem to be trading up from fast-food options.

Although total retail sales fell 0.8 percent in January from 0.9 percent in December, core retail sales—those excluding auto, gas, and building materials—rose 0.2 percent in January from December's decline to 0.1 percent, month over month. Retail sales maintained the same pace of growth for December and January rising 3.3 percent year over year (see the chart).

Retail-sale

Overall, the consumption sector looks reasonably vibrant. And as one of my industry contacts said, "Every day gets better." It appears that Chairman Bernanke isn't the only one enjoying his current situation.

Photo of Christine VietsBy Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed

February 9, 2015

A New Year, a Better Economy?

The optimism expressed by the Jacksonville Branch's contacts in north and central Florida in the latter half of 2014 continued through the holidays and into early 2015. Conditions were described as quite good, and the majority of contacts reported strengthening demand across multiple sectors. Further, reported headwinds for current and future activity decreased noticeably.

Universities noted some challenges with enrollment, which—although negative for the schools—reflects a strengthening economy and an improving job market as prospective students lean toward employment rather than continuing education. Growth in new customer demand for utilities indicates people moving. Several financial institutions cited robust consumer lending, led by an increase in demand for auto loans. Some banks reported double-digit increases in credit card use by consumers. However, they described residential mortgage lending as soft, with inventories of both existing and new homes remaining low. Small business lending was characterized as very strong compared with the same period a year ago. Tourism in central Florida remained robust amid reports of record-setting attendance and revenue at some attractions, along with elevated occupancy rates at area hotels for the last half of 2014. Regarding holiday sales, contacts reported increases over year-earlier levels.

Employment and labor markets
Employment stories were mixed during the past couple of months. Some larger companies reported increases in staff, but others indicated that employment levels have shrunk as a result of efficiency and automation. Struggles to find talent continued to be widespread across higher-skilled jobs, including those in compliance, engineering, underwriting, and actuarial science. Some contacts suggested that some lower-skill jobs are also becoming more difficult to fill. In the Orlando area, service workers were in high demand to meet strong tourism activity, which has resulted in employee churn among employers in the hospitality, retail, and theme park/entertainment industries.

Labor and nonlabor costs and prices
Although few contacts reported wage pressures building, certain jobs continue to command higher salaries as competition for talent increased. For example, we heard that some firms are increasing wages to attract and retain accountants. Also, talented lawyers fresh out of law school seeking positions with large law firms are asking for, and getting, higher wages that not only cover the cost of living but help pay down college debt. However, contacts noted a change in the types of jobs where wage increases were evident, such as entry-level distribution center labor, and they expect that wage pressures will increase. Contacts reported offering a variety of other types of compensation, including performance-based incentive payouts, stock options, and equity increases to retain key employees. Increased offerings of "soft benefits," such as more time off and flex time, were also reported. Most contacts reported merit increases between 2 percent and 3.5 percent. Health care premium increases continued to be mixed across all contacts.

We continued to hear from a majority of contacts that nonlabor input cost increases appeared to be stable or slowing. Companies with contractual agreements of multiple years with customers were reporting some pricing power during renegotiations, although government and defense contractors reported very limited pricing power and have been forced to reduce costs to maintain margins.

Falling gas prices have had a positive effect, giving consumers in particular a psychological boost regarding spending. Travel and tourism contacts in central Florida reported increased passenger traffic and hotel occupancy. Others reported higher activity in auto sales, where product sales have shifted to trucks and SUVs in response to lower fuel prices.

Availability of credit/investment
Credit continued to be readily available for most large companies. Bank and credit union contacts indicated strong demand across most lines of business, with an increased interest in warehousing as the retail sector continued to increasingly use online fulfillment in addition to traditional brick-and-mortar stores. Other financial institutions reported significant improvements in the credit quality of consumers. Contacts cited examples of capital investments in IT (for efficiency and process automation), acquisitions, and infrastructure.

Business outlook
Contacts have expressed increased confidence in their outlook, and most are experiencing and expect further improvement. They cited few domestic headwinds outside of the unknowns related to oil's rapid price decline and the regulatory environment in banking and other industries. We continue to hear more about a possible resurgence of domestic manufacturing, with rising wages in Asia and the lower cost of energy in the Western Hemisphere, which could drive manufacturing to Mexico and to the United States during in the medium term. Contacts with a strong international presence didn't view the strengthening dollar as their biggest worry. Rather, they described demand challenges in certain markets and U.S. tax policy as more worrisome. Overall, contacts during the past three months were upbeat about economic conditions, with the majority forecasting higher growth during the short and medium term.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch, and Chris Oakley, regional executive at the Jacksonville Branch

August 20, 2015

It's Mostly Sunny in Florida

20130910-0498-jacksonville
Jacksonville, Florida. Photo by Kendrick Disch

In a February SouthPoint post about economic conditions in north and central Florida, we reported that our contacts' optimism in late 2014 had carried into the new year. Since then, the Regional Economic Information Network team at the Jacksonville Branch has noted an overall improvement in activity and continued positive sentiment.

General business conditions continue firming
Feedback throughout the winter months was quite upbeat. Most contacts felt that an improving economy and labor market were driving growth. In early spring, although feedback remained positive, the messages became more mixed, with some contacts indicating a plateau in growth—most notably, transportation and retail contacts cited challenges from severe weather in various markets. However, bankers noted reasonable momentum with consumers and businesses; real estate contacts saw robust activity with increasing sales and prices at all price points; and homebuilders and commercial construction firms noted much stronger levels of activity. Tourism remained vibrant. Though the consumer inched along, restaurants reported revenue increases that they believe were the result of lower gas prices influencing discretionary spending. As spring progressed, activity continued along an upward, albeit slow, trajectory.

By midsummer, a small number of contacts reported demand was flat, and transportation contacts reported that activity—especially related to the movement of energy-related materials—declined notably since the first quarter. However, a majority of other contacts noted improved activity. Some began to add to capacity to meet increased demand—and, more importantly, anticipated future demand.

Employment largely stable
Throughout the first part of 2015, contacts continued to indicate no major problems in filling jobs outside of information technology (IT), accounting, compliance, and truck drivers. Staffing levels across firms generally remained steady, with some adding to headcount. Those hesitant to add staff turned to contingent labor (such as contract staff or temps) to meet demand. In late spring, we began to hear about increased turnover at many levels, and recruiting and retention appeared to be getting tougher. In central Florida, tourism contacts cited concerns of potential worker shortages as a result of a very low regional unemployment rate and increased construction attracting available labor.

Labor, nonlabor costs and price pressure surfacing
By March, mentions of mounting wage pressures at all job levels surfaced. Though not universally reported, numerous contacts said they were beginning to increase starting salaries, which they noted will eventually ripple through higher levels of staff to maintain internal pay equity and retain talent. Wages increased for engineers, truckers and technicians, and IT specialists. Into the summer, stories of referral and signing bonuses, customized perks, and other benefits enhancements for both recruitment and retention became more common.

Feedback on health care costs continued to be mixed. Health care costs for most increased at a pace greater than overall inflation, though companies continued to try to minimize the increases by changing plan designs or by sharing more of the cost with employees.

Overall, concerns about nonlabor costs were muted. Some mentioned lower energy and fuel costs have offset increases in other input costs.

The ability to raise prices varied among industries. However, a number of contacts indicated pricing power had improved, though the magnitude of price increases was limited. Generally, though, margins were edging up.

Credit, investment remain available
Throughout the first half of the year, credit was readily available and banking contacts reported increased activity. Many companies, especially small businesses, continued to deleverage even in the low interest rate environment, and many larger firms reported funding investments internally. Lenders reported increases in mortgage refinances as rates dipped, and they noted improved home equity levels. Auto lending was described as extremely strong.

Almost without exception, retail contacts noted expansion activity and further growth plans, all the result of expectations for stronger consumer spending. Real estate agents indicated that appraisal issues improved, and buyers, even the self-employed, generally faced little trouble financing home purchases. Stories regarding business investment were mixed between outlays for deferred projects and spending for new demand. This year, it's become clear that there is less hesitation about investment.

Business outlook mostly bright
Though we heard a couple of references to a cloudier outlook during the next two to three years as we approach another presidential election, collectively—and as recently as July—most REIN contacts and board members were as positive about current activity and future expectations as we have seen since the recession.

What's is in store for Florida in the second half of the year? Stay tuned.

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both of the Atlanta Fed's Jacksonville Branch

March 12, 2015

Southeast PMI Surges in February

The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.

The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current 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 contracting activity.

The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:

  • The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
  • The production subindex increased 3.5 points over the previous month and now reads 64.6.
  • The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
  • The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
  • The finished inventory subindex increased 5.5 points compared with January.
  • The commodity prices subindex fell 1.7 points and now reads 35.4.

Southeast Purchasing Managers Index

Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.

The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.


February 27, 2015

Through the Eyes of a Big Fan

When Janet Yellen was named chair of the Board of Governors of the Federal Reserve System in February 2014, she became the fourth chair in my 30-year career here at the Atlanta Fed's Jacksonville Branch. While I vaguely remember Chairman Paul Volcker once visiting the branch, I was so new to the Bank and pretty naïve as to what the Fed actually did that I don't think I paid much attention back then. Soon after was Chairman Alan Greenspan, a brilliant man who spoke of economic conditions in a manner admittedly a bit hard for me to understand, especially since my Fed career began in an area not focused primarily on studying the economy. Then along came Chairman Ben Bernanke! Finally, someone who spoke in terms that even I could grasp. Couple his arrival with the creation of the Regional Economic Information Network and my foray into the world of economics (and the need for me to pay closer attention), I became an instant fan! I watched with great interest as Chairman Bernanke and the Federal Open Market Committee dusted off many lesser-known tools (as well as unveiling some brand-new tools) in the Fed's toolbox to help stimulate the economy during and after the Great Recession.

So, imagine my thrill at finding out that Chairman Bernanke was going to be a keynote speaker at this year's National Retail Federation's (NRF) annual conference that I had the great fortune to attend! I was like, whoop whoop! (I know, I'm just a big fan at heart!)

The morning of his appearance, I got up at zero-dark-thirty and was the first in line to enter the massive convention hall where he was scheduled to speak. I made a bee-line to the front and scoped out the best seat in the house. And I waited with anxious anticipation. I was like a teenage girl at her first rock concert when he took the stage. I listened intently as he and the president of Saks Fifth Avenue, who is serving as this year's NRF chairman, discussed the fallout from the global economic crisis and current prospects for the U.S. economy and the retail industry. It was amazing to listen to Bernanke speak in a much more casual manner (since now his comments do not necessarily move markets) about the events of the crisis and the actions taken by the Fed. (Remember, he is a scholar of the Great Depression of the 20th century and understood how the Fed could work to avoid the mistakes of the past.)

In addition to Chairman Bernanke sharing insights about the crisis with the audience, he commented on the transparency of the Federal Reserve System by saying, "In the middle of a crisis explaining where, why, and how we do what we do is as important as taking actions." When asked about the current state of the economy, Bernanke indicated that the U.S. economy is enjoying a genuine recovery. However, he has some concern regarding the European Union, noting that the situation should be watched carefully.

He was then asked what he missed most about being Fed chairman. He said that when he was chairman, he was driven everywhere by his security detail, so little things like traffic and finding parking spaces were never a concern. What he misses most, he said, "is not having to find my own parking spaces." He paused briefly and added, "That's all I miss."

How was I lucky enough to see Chairman Bernanke in person? As I mentioned, this was the NRF's annual conference, and one of my responsibilities as an analyst is to follow the retail sector and consumer behavior. So aside from my thrilling moment as a fan, what other insights did I glean at the conference? Well, when I attended the same conference two years ago, the underlying tone among participants was, "How do we get the consumer back to spending?" This year, the participants were upbeat and the focus seemed to be "We've got the consumer back, but how do we keep them back?" One answer was to create an engaging and exciting shopping experience.

Retailers must have been successful because revolving credit is up and consumer confidence is high. Let's take a look at our consumers and their behavior during the 2014 holiday shopping season.

Consumer credit outstanding rose $14.8 billion in December from $13.5 billion in November (see the chart). Nonrevolving credit, which is made up mostly of auto and student loans, rose $9.0 billion. However, the more noteworthy movement is that revolving credit rose a significant $5.8 billion in December from November's decline of $0.9 billion. In my opinion, this increase indicated the consumer was willing to take on debt previously avoided. Revolving credit, composed primarily of credit card loans, showed its strongest growth in eight months (the chart compares month-over-month data).

Change-in-consumer-credit

The Conference Board's survey on current conditions rose significantly to a seven-year high of 112.6 points in January from December's reading of 99.9. The University of Michigan's index rose to 109.3 points in January from 104.8 in December. The Conference Board's current conditions survey is based on the survey participants' view of current economic conditions as it relates to businesses and jobs, while the University of Michigan's survey is based on the individuals' sentiment as it relates to their personal households (see the chart).

Consumer-confidence-indices

The Conference Board's measure of expectations rose moderately to 96.4 points in January from 88.5 in December. The University of Michigan's index rose to 91.0 points in January from December's reading of 86.4. The expectations surveys by both entities are based on the same views of the survey participants as the current conditions surveys. However, the forward-looking expectations time frame differs. The Conference Board is looking six months out, and the University of Michigan is looking one to five years out (see the chart).

Consumer-confidence-indices-measuring-expectations

It appears, for now, that the consumer is increasingly upbeat, which is vital to the strength of the economy. Several District retail contacts recently reported double-digit growth and record-setting volume in 2014. Casual dining establishments saw an uptick in volume as consumers seem to be trading up from fast-food options.

Although total retail sales fell 0.8 percent in January from 0.9 percent in December, core retail sales—those excluding auto, gas, and building materials—rose 0.2 percent in January from December's decline to 0.1 percent, month over month. Retail sales maintained the same pace of growth for December and January rising 3.3 percent year over year (see the chart).

Retail-sale

Overall, the consumption sector looks reasonably vibrant. And as one of my industry contacts said, "Every day gets better." It appears that Chairman Bernanke isn't the only one enjoying his current situation.

Photo of Christine VietsBy Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed

February 9, 2015

A New Year, a Better Economy?

The optimism expressed by the Jacksonville Branch's contacts in north and central Florida in the latter half of 2014 continued through the holidays and into early 2015. Conditions were described as quite good, and the majority of contacts reported strengthening demand across multiple sectors. Further, reported headwinds for current and future activity decreased noticeably.

Universities noted some challenges with enrollment, which—although negative for the schools—reflects a strengthening economy and an improving job market as prospective students lean toward employment rather than continuing education. Growth in new customer demand for utilities indicates people moving. Several financial institutions cited robust consumer lending, led by an increase in demand for auto loans. Some banks reported double-digit increases in credit card use by consumers. However, they described residential mortgage lending as soft, with inventories of both existing and new homes remaining low. Small business lending was characterized as very strong compared with the same period a year ago. Tourism in central Florida remained robust amid reports of record-setting attendance and revenue at some attractions, along with elevated occupancy rates at area hotels for the last half of 2014. Regarding holiday sales, contacts reported increases over year-earlier levels.

Employment and labor markets
Employment stories were mixed during the past couple of months. Some larger companies reported increases in staff, but others indicated that employment levels have shrunk as a result of efficiency and automation. Struggles to find talent continued to be widespread across higher-skilled jobs, including those in compliance, engineering, underwriting, and actuarial science. Some contacts suggested that some lower-skill jobs are also becoming more difficult to fill. In the Orlando area, service workers were in high demand to meet strong tourism activity, which has resulted in employee churn among employers in the hospitality, retail, and theme park/entertainment industries.

Labor and nonlabor costs and prices
Although few contacts reported wage pressures building, certain jobs continue to command higher salaries as competition for talent increased. For example, we heard that some firms are increasing wages to attract and retain accountants. Also, talented lawyers fresh out of law school seeking positions with large law firms are asking for, and getting, higher wages that not only cover the cost of living but help pay down college debt. However, contacts noted a change in the types of jobs where wage increases were evident, such as entry-level distribution center labor, and they expect that wage pressures will increase. Contacts reported offering a variety of other types of compensation, including performance-based incentive payouts, stock options, and equity increases to retain key employees. Increased offerings of "soft benefits," such as more time off and flex time, were also reported. Most contacts reported merit increases between 2 percent and 3.5 percent. Health care premium increases continued to be mixed across all contacts.

We continued to hear from a majority of contacts that nonlabor input cost increases appeared to be stable or slowing. Companies with contractual agreements of multiple years with customers were reporting some pricing power during renegotiations, although government and defense contractors reported very limited pricing power and have been forced to reduce costs to maintain margins.

Falling gas prices have had a positive effect, giving consumers in particular a psychological boost regarding spending. Travel and tourism contacts in central Florida reported increased passenger traffic and hotel occupancy. Others reported higher activity in auto sales, where product sales have shifted to trucks and SUVs in response to lower fuel prices.

Availability of credit/investment
Credit continued to be readily available for most large companies. Bank and credit union contacts indicated strong demand across most lines of business, with an increased interest in warehousing as the retail sector continued to increasingly use online fulfillment in addition to traditional brick-and-mortar stores. Other financial institutions reported significant improvements in the credit quality of consumers. Contacts cited examples of capital investments in IT (for efficiency and process automation), acquisitions, and infrastructure.

Business outlook
Contacts have expressed increased confidence in their outlook, and most are experiencing and expect further improvement. They cited few domestic headwinds outside of the unknowns related to oil's rapid price decline and the regulatory environment in banking and other industries. We continue to hear more about a possible resurgence of domestic manufacturing, with rising wages in Asia and the lower cost of energy in the Western Hemisphere, which could drive manufacturing to Mexico and to the United States during in the medium term. Contacts with a strong international presence didn't view the strengthening dollar as their biggest worry. Rather, they described demand challenges in certain markets and U.S. tax policy as more worrisome. Overall, contacts during the past three months were upbeat about economic conditions, with the majority forecasting higher growth during the short and medium term.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch, and Chris Oakley, regional executive at the Jacksonville Branch