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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.


June 5, 2014

Leafing through Developments in the New Beige Book

Yesterday, the Fed´s Board of Governors published the Beige Book. The report, published in advance of the upcoming Federal Open Market Committee meeting, provides a summary of recent economic conditions gathered by all of the Federal Reserve Banks.

The first sentence of each section often gives a succinct overview of economic conditions in each specific region. Below is a compilation of each section´s lead sentence:

National: All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period.
Boston: Business activity generally continues to increase on a year-over-year basis in the First District, but performance varies across sectors.
New York: Economic activity in the Second District has continued to grow at a moderate pace since the last report.
Philadelphia: Aggregate business activity in the Third District grew at a modest pace during this current Beige Book period.
Cleveland: Business activity in the Fourth District expanded at a modest pace during the past six weeks.
Richmond: Fifth District economic activity expanded moderately in recent weeks, and contacts reported an optimistic outlook.
Atlanta: Sixth District business contacts described economic conditions as improving modestly in April and May.
Chicago: Growth in economic activity in the Seventh District was moderate in April and May.
St. Louis: The economy of the Eighth District has grown modestly since our previous report.
Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
Kansas City: The Tenth District economy expanded modestly in late April and early May with solid expectations for growth during the coming months.
Dallas: The Eleventh District economy grew at a moderate pace over the past six weeks.
San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of early April through mid-May.

Overall, it´s clear that economic activity continued to pick up at a moderate pace in every region. Here are some highlights from the Atlanta Fed´s section:

Employment and prices
District payroll growth improved modestly since the last report. Staffing agencies noted a small increase in transitioning workers from temporary to permanent positions. Firms continued to show a preference towards using capital investment to enhance efficiency over hiring.

Consumer spending and tourism
District retail reports were mixed in April and May. Merchants with multiple sites stated that sales were better in locations with more affluent customers. Retailers reporting lackluster growth attributed it to a number of factors, including people diverting spending to obtain mandatory health insurance and a reduction in food stamp benefits. Contacts from the District´s tourism and hospitality sector expressed an overall exuberance regarding activity. The near-term outlook among contacts remains positive.

Manufacturing and transportation
District contacts reported that manufacturing activity continued to expand. Growth in new orders, production, and employment suggested substantial strengthening in the District´s manufacturing sector. Transportation contacts continued to cite expanding activity in April and May. District ports reported significant increases in exports of energy-related products; record unit volumes of cars, trucks, and tractors; and double-digit growth in containerized cargo.

Real estate and construction
More District brokers reported growth this period than the previous report expressed. Roughly two-thirds of broker reports indicated that home sales had increased from the year-earlier level. The majority of contacts continued to report that home prices remained ahead of the year-earlier level. Reports on current conditions from District builders were also more positive than the previous report. Most contacts reported that recent activity either met or exceeded their plan for the period.

Banking and finance
On balance, loan demand across the District increased, evidenced by a combination of new loan growth and increased lines of credit. Community banks also noted loan growth. However, new loans were being poached from larger banks.

Natural resources and agriculture
Energy activity in the District continued to expand as new discoveries, production, and oil field development increased across the Gulf Coast. Energy firms expect continued strength in the sector during the summer months.

The Board will publish the next Beige Book on July 16.


Photo of Sadat Karim By Sadat Karim, strategic information research analyst in the public affairs department of the Atlanta Fed

April 24, 2014

Reaching the Public with Confidence

Last week's Beige Book noted that "economic activity increased in most regions of the country since the previous report." Here in the Sixth Federal Reserve District, we wrote that:

On balance, the Sixth District economy expanded at a modest pace from mid-February through March. Reports across sectors were optimistic and most business contacts expect near-term activity to grow at a moderate pace.

How did the Atlanta Fed come to this conclusion? It is a combination of several inputs, including a careful analysis of what our business contacts reported to us in a series of one-on-one meetings held throughout the region. But we also factor in what we hear from broader audiences, such as public speeches, presentations to professional or community groups, and industry- or geographic-specific meetings throughout the region.

Atlanta Fed economists and regional executives connect with their communities on a frequent basis. Such an approach allows us to reach a broad audience, and although we do not have the opportunity to perform deep dives like we do in our one-on-one meetings, we do get a good sense from the audience just how the local economy is performing.

For example, Adrienne Slack, our regional executive in New Orleans, delivered two talks on the Gulf Coast, one to a local group of businesses and one to an audience made up of businesses from throughout the country. What she heard confirmed our analysis that the economy in this region was performing somewhat better than the nation as a whole. She reported that:

The tenor of the Gulf Coast audience was optimistic and inquisitive about our thoughts regarding our forecast and the staying power of the recovery. The national audience was also keenly interested in our outlook; however, their own perspective was less optimistic. They too were seeing encouraging trends but not the growth and investment currently at play along the Coast.

Chris Oakley, our regional executive working from our Jacksonville Branch, delivered a talk in Tampa where he noted some concern regarding the level of confidence in our economic forecast. Chris was asked, "What makes you more confident that projections for growth in 2014 will come to fruition as compared to the last several years?" Chris responded that we were more confident that the economy would improve because of several factors, including:

  • Consumers have adjusted to the reinstatement of the 2 percent social security payroll tax;
  • There are no looming fiscal deadlines in the short term (debt ceiling, fiscal cliff, etc.); and
  • Economic weakness among some of our foreign trading partners appears to have abated.

"This environment is allowing for greater visibility and confidence, which translates to more investment and spending," Oakley said, echoing comments made by Atlanta Fed President Dennis Lockhart in a March 6 speech at Georgetown University:

Let me expand on my claim that the economy's fundamentals are stronger. I think basic conditions in several key sectors of the economy are much improved compared with earlier in the recovery period. I would cite banking, housing, energy, and manufacturing as examples.

Household balance sheets are much healthier now thanks to reduced debt, higher saving, and stronger asset prices, including higher home values.

Business and financial-system leverage has been significantly reduced from levels precrisis that were demonstrated to be unsustainable. Business profitability is good, and firm balance sheets are generally liquid.

Likewise, fiscal imbalances, while not solved for the long term, are somewhat less a near-term concern. Finally, employment markets are unquestionably in a better state compared to even a year ago.

President Lockhart continued:

At the same time, certain headwinds that have persistently buffeted the economy and restrained growth appear to have lessened. The fiscal drag associated with federal government budget austerity measures has eased. The risk of another financial meltdown emanating from Europe seems to have receded. Concerns about European sovereign debt and the exposure of the European banking system were an important source of uncertainty that weighed heavily on business confidence in the years 2011 and 2012, for instance.

Photo of Mike ChrisztBy Mike Chriszt, vice president in the public affairs department of the Atlanta Fed


March 6, 2014

Beige Book: Did Weather Cool the Nation's Economic Growth?

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. These findings are reported in the Beige Book. Then, one of the Reserve Banks is randomly selected to write the national summary, a digest of all 12 Banks' reports. This time, my Atlanta Fed colleagues and I wrote the most recent national summary.

Similar to recent incoming economic data citing possible weather-related effects on consumer spending, manufacturing, and transportation (to mention a few), the national summary of the Beige Book cites the weather as also having an impact on activity in several sectors. Here are some Beige Book excerpts that mention weather-related economic effects (emphasis mine):

Consumer spending and tourism:

Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity. Weather was also cited as a contributing factor to softer auto sales in many Districts, with the exception of Cleveland, which saw strong gains.

Recent winter weather conditions benefited many ski resorts in Kansas City, Richmond, and Minneapolis. Atlanta and Boston also indicated that hotels fared well from the >weather, but that restaurants, museums, and other attractions were negatively impacted. Airline contacts from Dallas indicated solid to slightly stronger demand, with some temporary disruptions due to severe winter weather across the nation.

Nonfinancial services and transportation:

Both New York and Philadelphia reported that severe winter weather reduced demand for services in their region.

Severe weather reportedly disrupted supply chains and delayed shipments in several Districts. In Dallas, railroad cargo volumes fell slightly below year earlier levels, with winter weather conditions across the country largely to blame. Manufacturing sales and production in several Districts were negatively impacted by severe winter weather; however, modest improvements were noted in Boston, Atlanta, Minneapolis, and Dallas.

Real estate and construction:

Residential real estate markets continued to improve in several areas, albeit modestly. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions.

Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather.

Agriculture and natural resources:

Severe winter weather affected several Districts with some crop damage being reported by Richmond and Atlanta, while Chicago noted disruptions in the flow of agricultural products. Both Kansas City and Dallas cited dry conditions adversely affecting wheat crops, while San Francisco reported concerns about water shortages and water costs.

District reports showed continued strength in energy production and demand for oil and gas; much of the increased demand was driven by unusually cold winter weather. In contrast, Minneapolis indicated that oil and gas exploration decreased slightly from recent months, primarily due to the extremely cold weather. Inventory drawdowns and supply shortages of natural gas and propane were reported in Atlanta, Chicago, and Dallas due to increased withdrawals that were exacerbated by the severe weather. Nearly all Districts attributed energy price surges to increased demand during the unusually cold weather; yet, Boston reported that natural gas prices were also driven up by pressure on pipeline capacity in New England.

Employment and prices:

Since the previous report, the pace of hiring had reportedly softened in Boston, Richmond, and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather.

Chicago, Minneapolis, and Dallas noted that unseasonably cold weather had pushed up costs for some energy products.

Although it seems that the weather has had a negative effect on economic growth so far this year, we won't know the full impact until a little more time has passed and Mother Nature decides to bring on the sunshine.

Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment: Since the last report, job growth remained muted across the District. Contacts in construction, manufacturing, energy, hospitality, and real estate noted modest growth in employment.

Prices: Most contacts reported modest and relatively stable labor and material cost pressures. Construction industry contacts remained a notable exception, indicating strong upward pressure on labor costs and some material prices.

Consumer spending and tourism: Merchants reported a slow start to the year with sales growth declining. Many contacts noted that the drop in sales growth was partially attributed to the unusual winter weather experienced in parts of the region. Hospitality contacts reported an increase in business and convention bookings.

Real estate and construction: Most brokers said sales were slightly up compared with a year earlier, and more contacts noted that sales activity was in line with their plan for the period. By most accounts, inventory levels had fallen on a year-over-year basis. The majority of contacts reported that home prices remained ahead of the year-earlier level but that price gains have slowed on a month-over-month basis.

The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level, although most reports indicated that unsold inventory levels had remained unchanged from a year ago. The majority of contacts also reported modest home price appreciation.

District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year. Most contacts reported that their backlog was ahead of year-earlier levels.

Manufacturing: Manufacturing contacts in the region cited expanding activity from January through mid-February, but the pace of growth was moderate. Contacts reported improvements in new orders and production. However, a number of contacts stated that the unusual winter weather affected production in late January, and output was lower than planned for that month.

Banking and finance: A number of lenders reported increases in purchase mortgages, but not enough to offset the declines in refinances.

The next Beige Book will be published April 16.

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

December 11, 2013

Beige Book: Southeast Growing at a Moderate Pace

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.

Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:

  • National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
  • Boston: Economic activity continues to expand in the First District.
  • New York: Economic growth in the Second District has continued at a moderate pace since the last report.
  • Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
  • Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
  • Richmond: The District economy expanded moderately in recent weeks.
  • Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
  • Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
  • St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
  • Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
  • Kansas City: The Tenth District economy continued to grow modestly in November.
  • Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
  • San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.

As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.

Prices
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.

Year-Ahead Unit Cost Expectations

Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.

Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.

Manufacturing
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.

Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.

The next Beige Book will be published January 15.

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

 

June 5, 2014

Leafing through Developments in the New Beige Book

Yesterday, the Fed´s Board of Governors published the Beige Book. The report, published in advance of the upcoming Federal Open Market Committee meeting, provides a summary of recent economic conditions gathered by all of the Federal Reserve Banks.

The first sentence of each section often gives a succinct overview of economic conditions in each specific region. Below is a compilation of each section´s lead sentence:

National: All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period.
Boston: Business activity generally continues to increase on a year-over-year basis in the First District, but performance varies across sectors.
New York: Economic activity in the Second District has continued to grow at a moderate pace since the last report.
Philadelphia: Aggregate business activity in the Third District grew at a modest pace during this current Beige Book period.
Cleveland: Business activity in the Fourth District expanded at a modest pace during the past six weeks.
Richmond: Fifth District economic activity expanded moderately in recent weeks, and contacts reported an optimistic outlook.
Atlanta: Sixth District business contacts described economic conditions as improving modestly in April and May.
Chicago: Growth in economic activity in the Seventh District was moderate in April and May.
St. Louis: The economy of the Eighth District has grown modestly since our previous report.
Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
Kansas City: The Tenth District economy expanded modestly in late April and early May with solid expectations for growth during the coming months.
Dallas: The Eleventh District economy grew at a moderate pace over the past six weeks.
San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of early April through mid-May.

Overall, it´s clear that economic activity continued to pick up at a moderate pace in every region. Here are some highlights from the Atlanta Fed´s section:

Employment and prices
District payroll growth improved modestly since the last report. Staffing agencies noted a small increase in transitioning workers from temporary to permanent positions. Firms continued to show a preference towards using capital investment to enhance efficiency over hiring.

Consumer spending and tourism
District retail reports were mixed in April and May. Merchants with multiple sites stated that sales were better in locations with more affluent customers. Retailers reporting lackluster growth attributed it to a number of factors, including people diverting spending to obtain mandatory health insurance and a reduction in food stamp benefits. Contacts from the District´s tourism and hospitality sector expressed an overall exuberance regarding activity. The near-term outlook among contacts remains positive.

Manufacturing and transportation
District contacts reported that manufacturing activity continued to expand. Growth in new orders, production, and employment suggested substantial strengthening in the District´s manufacturing sector. Transportation contacts continued to cite expanding activity in April and May. District ports reported significant increases in exports of energy-related products; record unit volumes of cars, trucks, and tractors; and double-digit growth in containerized cargo.

Real estate and construction
More District brokers reported growth this period than the previous report expressed. Roughly two-thirds of broker reports indicated that home sales had increased from the year-earlier level. The majority of contacts continued to report that home prices remained ahead of the year-earlier level. Reports on current conditions from District builders were also more positive than the previous report. Most contacts reported that recent activity either met or exceeded their plan for the period.

Banking and finance
On balance, loan demand across the District increased, evidenced by a combination of new loan growth and increased lines of credit. Community banks also noted loan growth. However, new loans were being poached from larger banks.

Natural resources and agriculture
Energy activity in the District continued to expand as new discoveries, production, and oil field development increased across the Gulf Coast. Energy firms expect continued strength in the sector during the summer months.

The Board will publish the next Beige Book on July 16.


Photo of Sadat Karim By Sadat Karim, strategic information research analyst in the public affairs department of the Atlanta Fed

April 24, 2014

Reaching the Public with Confidence

Last week's Beige Book noted that "economic activity increased in most regions of the country since the previous report." Here in the Sixth Federal Reserve District, we wrote that:

On balance, the Sixth District economy expanded at a modest pace from mid-February through March. Reports across sectors were optimistic and most business contacts expect near-term activity to grow at a moderate pace.

How did the Atlanta Fed come to this conclusion? It is a combination of several inputs, including a careful analysis of what our business contacts reported to us in a series of one-on-one meetings held throughout the region. But we also factor in what we hear from broader audiences, such as public speeches, presentations to professional or community groups, and industry- or geographic-specific meetings throughout the region.

Atlanta Fed economists and regional executives connect with their communities on a frequent basis. Such an approach allows us to reach a broad audience, and although we do not have the opportunity to perform deep dives like we do in our one-on-one meetings, we do get a good sense from the audience just how the local economy is performing.

For example, Adrienne Slack, our regional executive in New Orleans, delivered two talks on the Gulf Coast, one to a local group of businesses and one to an audience made up of businesses from throughout the country. What she heard confirmed our analysis that the economy in this region was performing somewhat better than the nation as a whole. She reported that:

The tenor of the Gulf Coast audience was optimistic and inquisitive about our thoughts regarding our forecast and the staying power of the recovery. The national audience was also keenly interested in our outlook; however, their own perspective was less optimistic. They too were seeing encouraging trends but not the growth and investment currently at play along the Coast.

Chris Oakley, our regional executive working from our Jacksonville Branch, delivered a talk in Tampa where he noted some concern regarding the level of confidence in our economic forecast. Chris was asked, "What makes you more confident that projections for growth in 2014 will come to fruition as compared to the last several years?" Chris responded that we were more confident that the economy would improve because of several factors, including:

  • Consumers have adjusted to the reinstatement of the 2 percent social security payroll tax;
  • There are no looming fiscal deadlines in the short term (debt ceiling, fiscal cliff, etc.); and
  • Economic weakness among some of our foreign trading partners appears to have abated.

"This environment is allowing for greater visibility and confidence, which translates to more investment and spending," Oakley said, echoing comments made by Atlanta Fed President Dennis Lockhart in a March 6 speech at Georgetown University:

Let me expand on my claim that the economy's fundamentals are stronger. I think basic conditions in several key sectors of the economy are much improved compared with earlier in the recovery period. I would cite banking, housing, energy, and manufacturing as examples.

Household balance sheets are much healthier now thanks to reduced debt, higher saving, and stronger asset prices, including higher home values.

Business and financial-system leverage has been significantly reduced from levels precrisis that were demonstrated to be unsustainable. Business profitability is good, and firm balance sheets are generally liquid.

Likewise, fiscal imbalances, while not solved for the long term, are somewhat less a near-term concern. Finally, employment markets are unquestionably in a better state compared to even a year ago.

President Lockhart continued:

At the same time, certain headwinds that have persistently buffeted the economy and restrained growth appear to have lessened. The fiscal drag associated with federal government budget austerity measures has eased. The risk of another financial meltdown emanating from Europe seems to have receded. Concerns about European sovereign debt and the exposure of the European banking system were an important source of uncertainty that weighed heavily on business confidence in the years 2011 and 2012, for instance.

Photo of Mike ChrisztBy Mike Chriszt, vice president in the public affairs department of the Atlanta Fed


March 6, 2014

Beige Book: Did Weather Cool the Nation's Economic Growth?

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. These findings are reported in the Beige Book. Then, one of the Reserve Banks is randomly selected to write the national summary, a digest of all 12 Banks' reports. This time, my Atlanta Fed colleagues and I wrote the most recent national summary.

Similar to recent incoming economic data citing possible weather-related effects on consumer spending, manufacturing, and transportation (to mention a few), the national summary of the Beige Book cites the weather as also having an impact on activity in several sectors. Here are some Beige Book excerpts that mention weather-related economic effects (emphasis mine):

Consumer spending and tourism:

Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity. Weather was also cited as a contributing factor to softer auto sales in many Districts, with the exception of Cleveland, which saw strong gains.

Recent winter weather conditions benefited many ski resorts in Kansas City, Richmond, and Minneapolis. Atlanta and Boston also indicated that hotels fared well from the >weather, but that restaurants, museums, and other attractions were negatively impacted. Airline contacts from Dallas indicated solid to slightly stronger demand, with some temporary disruptions due to severe winter weather across the nation.

Nonfinancial services and transportation:

Both New York and Philadelphia reported that severe winter weather reduced demand for services in their region.

Severe weather reportedly disrupted supply chains and delayed shipments in several Districts. In Dallas, railroad cargo volumes fell slightly below year earlier levels, with winter weather conditions across the country largely to blame. Manufacturing sales and production in several Districts were negatively impacted by severe winter weather; however, modest improvements were noted in Boston, Atlanta, Minneapolis, and Dallas.

Real estate and construction:

Residential real estate markets continued to improve in several areas, albeit modestly. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions.

Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather.

Agriculture and natural resources:

Severe winter weather affected several Districts with some crop damage being reported by Richmond and Atlanta, while Chicago noted disruptions in the flow of agricultural products. Both Kansas City and Dallas cited dry conditions adversely affecting wheat crops, while San Francisco reported concerns about water shortages and water costs.

District reports showed continued strength in energy production and demand for oil and gas; much of the increased demand was driven by unusually cold winter weather. In contrast, Minneapolis indicated that oil and gas exploration decreased slightly from recent months, primarily due to the extremely cold weather. Inventory drawdowns and supply shortages of natural gas and propane were reported in Atlanta, Chicago, and Dallas due to increased withdrawals that were exacerbated by the severe weather. Nearly all Districts attributed energy price surges to increased demand during the unusually cold weather; yet, Boston reported that natural gas prices were also driven up by pressure on pipeline capacity in New England.

Employment and prices:

Since the previous report, the pace of hiring had reportedly softened in Boston, Richmond, and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather.

Chicago, Minneapolis, and Dallas noted that unseasonably cold weather had pushed up costs for some energy products.

Although it seems that the weather has had a negative effect on economic growth so far this year, we won't know the full impact until a little more time has passed and Mother Nature decides to bring on the sunshine.

Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment: Since the last report, job growth remained muted across the District. Contacts in construction, manufacturing, energy, hospitality, and real estate noted modest growth in employment.

Prices: Most contacts reported modest and relatively stable labor and material cost pressures. Construction industry contacts remained a notable exception, indicating strong upward pressure on labor costs and some material prices.

Consumer spending and tourism: Merchants reported a slow start to the year with sales growth declining. Many contacts noted that the drop in sales growth was partially attributed to the unusual winter weather experienced in parts of the region. Hospitality contacts reported an increase in business and convention bookings.

Real estate and construction: Most brokers said sales were slightly up compared with a year earlier, and more contacts noted that sales activity was in line with their plan for the period. By most accounts, inventory levels had fallen on a year-over-year basis. The majority of contacts reported that home prices remained ahead of the year-earlier level but that price gains have slowed on a month-over-month basis.

The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level, although most reports indicated that unsold inventory levels had remained unchanged from a year ago. The majority of contacts also reported modest home price appreciation.

District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year. Most contacts reported that their backlog was ahead of year-earlier levels.

Manufacturing: Manufacturing contacts in the region cited expanding activity from January through mid-February, but the pace of growth was moderate. Contacts reported improvements in new orders and production. However, a number of contacts stated that the unusual winter weather affected production in late January, and output was lower than planned for that month.

Banking and finance: A number of lenders reported increases in purchase mortgages, but not enough to offset the declines in refinances.

The next Beige Book will be published April 16.

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

December 11, 2013

Beige Book: Southeast Growing at a Moderate Pace

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.

Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:

  • National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
  • Boston: Economic activity continues to expand in the First District.
  • New York: Economic growth in the Second District has continued at a moderate pace since the last report.
  • Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
  • Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
  • Richmond: The District economy expanded moderately in recent weeks.
  • Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
  • Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
  • St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
  • Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
  • Kansas City: The Tenth District economy continued to grow modestly in November.
  • Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
  • San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.

As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.

Prices
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.

Year-Ahead Unit Cost Expectations

Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.

Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.

Manufacturing
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.

Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.

The next Beige Book will be published January 15.

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