Fed Beige Bk ? Atlanta ? Econ Expanded at Moderate Pace ...

WASHINGTON (MNI) ? The following is the Federal Reserve Beige
Book?s latest Sixth District economic assessment, published Wednesday:

Summary

Reports from Sixth District business contacts indicated that the
pace of economic activity expanded at a moderate pace in late February
through March. Expectations remained generally positive across most
sectors, although contacts expressed concern regarding the impact of
higher energy prices on the outlook.

Retailers mostly indicated sales were growing at a modest pace and
auto sales remained strong. Leisure and hospitality businesses reported
robust activity in all segments except cruise lines. Homebuilders and
brokers experienced improvements in sales of new and existing homes
while multifamily construction remained strong. General contractors
noted slow improvements in commercial construction conditions.
Manufacturers and transportation contacts reported positive production
trends, on balance. Loan demand remained relatively weak according to
community bank contacts. The share of firms reporting they were hiring
continued to increase, although many contacts continued to express a
preference for part-time or temporary contract workers. Most contacts
continued to report having relatively little pricing power. However, the
proportion of firms saying they were successful in their attempts to
pass on price increases rose since the last report.

Consumer Spending and Tourism

Most contact reports on consumer spending were generally positive.
Sales of home appliances, furniture, and autos were solid, while apparel
was more mixed. Most retailers remained optimistic that sales would
improve over the next three months, but noted that the impact of higher
gasoline prices posed a downside risk to their sales outlook.

Tourism activity remained strong and contacts were optimistic about
the outlook for leisure and hospitality spending in the summer.
Occupancy rates were up in many areas and South Florida continued to be
boosted by visitors from South America and Canada. Convention activity
continued to improve as well. Similar to retail, tourism contacts
expressed concern about higher fuel costs and the potential impact on
domestic travel to many regional tourist destinations. There continued
to be a modest drop off in bookings on some cruise lines, which was
attributed mostly to the recent disaster off the coast of Italy.

Real Estate and Construction

The majority of residential broker contacts reported that home
sales exceeded the year earlier level in late February and March. More
than two-thirds of the brokers indicated that sales met or exceeded
their expectations. Florida contacts noted strengthening sales,
particularly in South Florida markets. Many noted that inventory levels
across the District continued to decline on a year-over-year basis and,
in spite of this, home prices were flat to slightly down compared with a
year ago. The outlook among brokers for sales growth remained positive,
with most anticipating modest year-over-year gains over the next several
months.

The majority of homebuilder contacts reported that new home sales
and construction rose modestly during late February and March compared
with a year earlier. Similar to brokers, builders also noted that home
price declines abated somewhat and new home inventories continued to
decline on a year-over-year basis. Contacts observed that multifamily
construction remained robust across much of the District and new
projects continued to be announced. Over the next several months,
homebuilders anticipate sales and construction to be flat to slightly up
compared with a year ago.

Most commercial real estate contacts indicated that conditions
continued to improve slowly in the region. Contractors noted a slight
improvement in demand, but the market remained very competitive and
overall activity remained at low levels. Commercial real estate brokers
continued to report modest improvements in demand, mostly for class A
space in urban markets. Some reported that businesses have become more
willing to move ahead with lease plans. Rent concessions continued to be
noted with several brokers reporting that rates have begun to stabilize;
however, longer leases were reported which included generous tenant
improvements. The outlook among contacts was a bit more positive than
previously reported, but most contractors and commercial real estate
brokers continued to anticipate that activity would improve slowly this
year.

Manufacturing and Transportation

Manufacturing activity across the Sixth District improved compared
with the last report. Most contacts reported an increased level of both
new orders and production. Several large auto manufacturers announced
plans to hire more workers to meet increased demand for their products.
A major industrial equipment producer and two medium-sized manufacturers
announced plans to increase their presence in Georgia. Most
manufacturers also indicated some increase in non-labor input costs.

Transportation contacts continued to report volume growth across
most segments with the exception of air cargo, which is being hindered
by slowing global demand and rising fuel costs. A railroad contact noted
significant volume increases in automobiles, steel, and forestry
products. Domestic coal shipments slowed because of the effects of
warmer weather and lower natural gas prices. A port contact indicated
strong container volumes and increases in steel imports. The majority of
transportation contacts reported substantial investment spending in
anticipation of future demand.

Banking and Finance

Contacts at community banks indicated liquidity levels remained
high, a result of increasing deposit balances and relatively soft loan
demand. Some contacts acknowledged a slight increase in demand for C&I
and commercial real estate loans in some metropolitan areas, and a
general rise in demand for automobile loans. In rural areas, however,
low property valuations were said to be hindering overall loan activity.
The demand for mortgages varied widely by market and some community bank
contacts indicated that they have exited the mortgage origination market
altogether. Lending standards at these institutions have remained
largely unchanged. Smaller institutions noted tough competition from
larger banks for credit customers. Many of these contacts expressed
concern that regulatory compliance costs were affecting profit margins.

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** MNI Washington Bureau: 202-371-2121 **

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