WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Sixth District, published
Wednesday:

Manufacturing and Transportation.

Manufacturing contacts indicated that the pace of new orders and
production growth remained positive, but had moderated. A major
European-based aircraft manufacturer announced it will locate its first
American manufacturing facility in Alabama. A Florida manufacturer,
closely tied to the construction industry, reported improved but
volatile business conditions based on increases in construction of
multi-family dwellings, healthcare facilities, and construction at
ports.

According to railroad contacts, intermodal activity continued to
strengthen. Double-digit increases in shipments of petroleum products,
motor vehicles, and equipment were reported; however, movement of grain,
metallic ores, and nonmetallic minerals declined. A logistics contact
indicated slowing activity, particularly in the retail sector, and had
lowered projections slightly for the remainder of the year. Trucking
contacts reported softening volumes, and forecasts for the upcoming
shipping season were slightly less robust than earlier in the year.

Banking and Finance.

Banking contacts noted some improvement in residential mortgage
lending. Auto loans continued to be a source of strength, while
commercial and industrial lending remained soft. Contacts reported
significant competition among lenders for credit-worthy customers.
Bankers indicated that low interest rates, coupled with a limited number
of qualified borrowers, continued to squeeze bank margins.

Employment and Prices.

Regional employment growth remained positive, but muted. Employers
continued to cite uncertainty regarding future economic conditions as a
reason for limiting hiring and recent economic volatility appears to
have exacerbated these anxieties. Small stores with very low price
points reported doing well and were expanding with significant hiring
plans across the District. Contacts continued to note difficulty in
finding qualified applicants for many highly-technical positions, and
some reported problems finding candidates for some lower-skilled
positions. Many manufacturing and trucking contacts continued to note
challenges in attracting applicants with necessary skills. The skills
mismatch problem has been especially hard on low-wage individuals,
according to community and economic development contacts.

Firms responding in June to the Atlanta Fed’s Business Inflation
Expectations survey reported a decline in unit cost expectations for the
second consecutive month. Survey respondents indicated that, on average,
they expect labor and material costs to rise 1.7 percent over the next
12 months. That number is down from 1.8 percent in May and 2.1 percent
in April. Firms also reported that their unit costs had risen 1.6
percent compared with this time last year, which is unchanged from their
assessment in May. Business contacts reported that lower prices for
natural gas and refined oil products were reportedly providing some cost
relief. Wage pressures remained modest, although some employers noted
that they were increasing starting pay for workers with high-demand
skill sets.

Natural Resources and Agriculture.

Contacts continued to report that investment in expanding and
maintaining existing transportation infrastructure would be necessary to
accommodate increases in domestic oil and natural gas production.
Contacts have noted a steady increase in capital expenditures on
refineries for upgrades and expansions. Deep-water permits for offshore
drilling have increased. Varying levels of drought conditions had
expanded through much of the District resulting in stress to some crops.
However, the June tropical storm helped some areas. Compared with last
year, June’s prices paid to farmers were down for cotton and corn while
prices for oranges, beef, and soybeans increased.

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

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