WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey from the Atlanta district, published
Wednesday:

SIXTH DISTRICT ATLANTA

Summary.

Reports from Sixth District business contacts indicated that
economic activity rose moderately in late November and December. Holiday
sales were described as generally positive and above expectations.
Tourism contacts noted increases for both business and leisure travel.
Weakness continued to be reported in the real estate sector as both
builders and brokers noted very low levels of activity. Most
manufacturers noted a slight increase in new orders and production
levels, although those producing construction-related goods continued to
experience lower activity. Transportation companies reported moderating
freight volumes after significant increases earlier this year. Business
contacts continued to report that obtaining loans at acceptable terms
has remained difficult, especially for small businesses and start-ups.
Bankers repeated that they experienced a lack of loan demand from
qualified borrowers. Employment indicators continued to recover, albeit
slowly. Most business contacts said that they remain hesitant to add to
their permanent workforce until they experienced a sustained increase in
sales. A majority of business contacts indicated that current cost
pressures remained high, citing increasing material prices and rising
labor and benefits outlays. However, most firms remained reluctant to
pass input cost increases through to consumers given intense competitive
pressures.

Consumer Spending and Tourism.

Many District retail stores noted that holiday sales were above
their expectations. Most indicated that traffic and sales increased
compared with a year ago; however, smaller retailers reported less of an
increase in business than larger stores. The majority of businesses
contacted noted that sales were driven by a mixture of discounting and
stronger demand. The outlook among merchants remained optimistic.
District automobile dealers indicated that vehicle sales improved
recently and were ahead of year-ago levels. Sales of commercial trucks
were also up modestly.

Tourism activity increased slightly relative to a year ago for both
business and leisure travel and the outlook remained modestly positive
going into 2011. Hotel occupancy rates rose in several of the District’s
major markets compared with last year. Cruise lines reported an increase
in both bookings and pricing power.

Real Estate and Construction.

Reports from most District homebuilders indicated that the pace of
new home sales growth through December remained weak compared with a
year ago. Many contacts continued to report that buyers were having a
difficult time securing loans. Builders also noted construction activity
held steady at very low levels. The outlook was mixed with Florida and
Georgia builders expecting weaker activity over the next several months,
while elsewhere in the District modest improvements were expected.

Residential broker reports indicated that the pace of existing home
sales growth remained weak compared with a year ago, but declines were
more modest than in recent reports. Contacts also indicated that home
sales at the low-end of the market weakened notably. Throughout the
region, short-sales, REOs, and pending foreclosures continued to put
downward pressure on home prices which remained below year-earlier
levels in most areas. Realtor outlooks for sales growth over the next
several months improved somewhat from previous reports.

Nonresidential construction activity remained at low levels through
the end of the year. Commercial contractors said that the pace of
development and backlogs remained below the year-earlier level. Contacts
indicated that access to funding remained challenging and competition
for projects had become more intense. Many indicated that they expected
the commercial market to remain constrained in 2011.

Manufacturing and Transportation.

Sixth District manufacturers reported a modest increase in new
orders and production levels, while finished inventories contracted only
slightly. Several respondents expressed plans to increase production in
the short-term. Goods producers tied to the construction sector
continued to report very low levels of activity. Manufacturing-related
transportation companies reported moderating freight volumes after
significant increases earlier this year. Regional rail shipments of farm
products increased since the last report, nearly reaching double their
year-ago level, while shipments of motor vehicles and equipment
declined. The outlook among transportation firms remains optimistic for
2011 as moderate growth in shipments is expected for the first half of
the year.

Banking and Finance.

Some surveys indicated that credit standards have eased somewhat in
recent months, but remained tight compared with pre-recession levels.

Business contacts continued to report that obtaining loans on
acceptable terms has remained difficult, especially for new and small
businesses. Small businesses whose balance sheets were damaged by the
recession reported difficulty qualifying for loans even though their
financial situation had improved. Meanwhile, bankers continued to report
a lack of loan demand from qualified borrowers.

Employment and Prices.

District labor markets continued to recover, albeit slowly.
Business contacts reported that their hiring plans for 2011 have not
changed with most remaining hesitant to add to their permanent labor
force until they experienced a sustained increase in sales. District
firms continued to note a preference for increasing existing staff hours
and using part-time or temporary staff. Nevertheless, some contacts
noted that they plan to expand their workforce in 2011 at a conservative
pace in response to increased output, store openings, or replacing
employees lost to attrition or retirement.

A majority of business contacts indicated that current cost
pressures were higher, citing increasing material prices and rising
labor and benefit costs. Many firms also noted that they were setting
aside funds for expected future increases in employment taxes and
healthcare costs. However, firms remained reluctant to pass input cost
increases through to consumers given intense competitive pressures.
Nearly all contacts noted that markups were either near or below what
they considered to be normal, reporting that increased productivity has
placed some downward pressure on product prices.

Natural Resources and Agriculture.

Regional oil production reached its highest level in over six years
in the fourth quarter of 2010 as increased output from offshore
platforms boosted production. Although drilling activity remained well
below pre-oil spill levels, the number of rigs operating in the Gulf of
Mexico has crept up since hurricane season ended. Contacts continued to
note that the lower pace of drilling permit issuance and additional rig
inspections could weigh on future energy output in the Gulf.

Most of the Southeast continued to experience varying degrees of
prolonged drought. Reports also indicated that both the lack of rain and
colder-than-average temperatures have presented challenges to Florida
citrus growers. The drought has reduced the physical size of the fruit
slightly, and the recent cold snaps have affected young new plantings.
Supplies of both cotton and soybeans continue to be tight with strong
global demand keeping prices high.

** Market News International Washington Bureau: 202-371-2121 **

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