The Beige Book and Southeastern Economic Conditions

March 18, 2011

Jean Tate: Welcome to Southeastern Economic Perspectives, an occasional podcast from the Federal Reserve Bank of Atlanta. I'm Jean Tate, and the following comments discuss economic activity in the Southeast. Michael Chriszt, an assistant vice president responsible for the Regional Economic Information Network [or REIN], joins me.

Thanks, Mike.

Mike Chriszt: Thank you, Jean.

Tate: The Beige Book was released earlier in March. What did the Atlanta Fed's contribution say about regional economic conditions?

Mike Chriszt
Mike Chriszt
Chriszt: Jean, according to what our business contacts were telling us, conditions continued to improve in January and February, but at a modest pace. Overall, retailers said that the bad weather that we experienced in the Southeast in January did hold back sales a little bit, but they did experience a bounceback in February. The hospitality sector, both in terms of leisure travel and business travel, [was] positive. Unfortunately, residential and commercial construction still remain very weak.

A bright spot remains manufacturing. We've seen increases in new orders, and our contacts are telling us that they plan to increase production in the near term. But we still have that lag in the labor market where we haven't seen significant improvement in job creation or big declines in the unemployment rate from throughout our business contacts in the Southeast.

Tate: Well, I know that we compiled the Beige Book here in Atlanta this time. So can you talk a little bit about how our section compared to other districts'?

Chriszt: Yeah, we had the opportunity to be the district that compiled the national Beige Book. It rotates among the Reserve districts on a regular basis, and this last time it was our turn. So it was a real opportunity to see firsthand how conditions compared in other districts to what we are seeing here. And, for the most part, reports from other districts did agree with our take on economic conditions, in general. They reported that conditions continue to expand. Again, the word "modest" or "moderate" was used by many of the districts in their description of overall economic activity.

Another thing that we found that we had in common was we heard a little bit more talk among our retailers and manufacturing contacts about passing through some price increases. Not on an overwhelming basis, but some more noise with regard to that was picked up, not only in our district but in Atlanta. One caveat that we should add: in our contacts with retailers, they said—and they've been saying this for quite some time—that they had planned or were planning to increase some prices on some products, but they realized if there was significant consumer pushback that they were going to have to take back those price increases. But more importantly, we don't really see any evidence of wage pressures across any of the districts.

Tate: The wage question makes me want to turn to the employment report. The January state employment report was disappointing for the Sixth District. Can you talk a little bit about why and maybe talk about what the expectations are for labor market indicators?

Chriszt: Yeah, the five of our six states in the Southeast all showed job decreases in January. It wasn't totally unexpected given that the national report for January was very disappointing. We've seen increases in unemployment rates in several of our states. Tennessee was the only state that showed an increase in payroll employment in January. But I'm a bit more optimistic with regard to February—and we'll get those numbers out towards the end of March—given the fact that the national report was quite positive. We added 222,000 private-sector jobs nationally in February. So we're expecting a bit of a bounceback when we look at the states in our district.

I think part of it did have something to do with weather conditions. December numbers were quite good with regard to retail sales. We saw some pullback in retail activity in January—again, some of it weather-related. So I think part of the explanation is seasonal factors and the lousy weather that we had here in the Southeast in January.

Looking beyond February, I think given that we're seeing some very positive signs in manufacturing, some increases in leisure activity, we think that we'll see some more modest increases in overall payroll employment for our states going forward from that.

Tate: Another indicator that we have talked about in the past is residential real estate. Can you talk about any signs that things might be improving in this sector?

Chriszt: Jean, we're seeing some increases in existing home sales, but mainly in Florida, and I think there is some price capitulation going on down there that is allowing some of those existing home sales to move. Nothing significant on the new construction side. Had a meeting recently with a couple of large construction companies here in Georgia and they are looking forward to only modest increases compared to what they did last year, and last year wasn't very good. So we're still seeing, I think, "bumping along the bottom" might be the best way to describe residential real estate.

A little bit more activity on the commercial side. Again, that's spotty; it's not widespread. There're different reports from geographic areas throughout the Southeast. So, overall, we're not seeing the kind of widespread improvement in residential or commercial real estate that we would have hoped to have seen by this point in the recovery.

Tate: So given some of the headwinds that might be existing, can you give me a sense of the overall outlook for our region's economy?

Chriszt: We really haven't changed our overall outlook, which is one for continued modest improvement. You mentioned the word "headwinds"—I think that's a great word to use—there is a new one that we really didn't have a couple of months ago, and that is the increase in energy prices that we experienced over the past month or so. How long are those prices going to stay elevated? Are they going to keep increasing? That is a significant uncertainty when we think about the outlook, not only for economic activity in the Southeast but nationally as well. So we have not at this point fundamentally changed our outlook for continued modest improvement and economic activity, either nationally or regionally, but recognizing that the increase in energy prices does pose significant uncertainty and another headwind to accelerating that rate of growth.

Tate: Thanks for your comments Mike.

Again, we've been listening to Atlanta Fed research team member Mike Chriszt provide insight into the southeastern economy.

This concludes our Southeastern Economic Perspectives podcast. Thanks for listening, and please return for more podcasts. If you have comments, please send us e-mail at