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

SIXTH DISTRICT – ATLANTA

Summary.

Sixth District business contacts described the economy as expanding
at a modest pace in October through mid-November. Retailers noted
sluggish sales growth compared with September; however, auto dealers
continued to experience robust sales. Tourism activity remained a bright
spot for most of the District. According to homebuilders and real estate
brokers, sales of new and existing homes remained weak, and home prices
continued to decline compared with September. Commercial real estate
contractors and brokers noted a slight improvement in nonresidential
activity. Manufacturers reported an increase in new orders but a modest
decline in production. Lending conditions remained constrained as weak
loan demand from businesses and consumers persisted. Reports from
businesses suggest that hiring plans continue to be subdued and remain
weighted toward hiring temporary or part-time labor. Most businesses
reported a moderation in input cost pressures, but also noted limited
ability to pass on increases in commodity and other input prices from
earlier in the year.

Consumer Spending and Tourism.

The majority of District retailers reported weaker activity in
October through mid-November compared with September. However, most
merchants said sales were flat to slightly up compared with a year ago.
Inventory levels remained largely unchanged as stores have continued
with tight inventory management practices. Retailers anticipate holiday
sales to be flat to slightly up compared to the same time last year.
Auto sales advanced further, with dealers noting double-digit growth
compared with a year ago.

Tourism activity remained strong across the District. Hotel
occupancy and room rates were up and convention bookings remained
steady. Cruise line contacts reported full occupancy and increased
onboard spending; however, advanced bookings were down as people made
reservations closer to departure dates. In Florida, international
tourists continued to bolster activity with increases in Latin American
visitors offsetting declines in European vacationers. Overall,
hospitality firms maintained an optimistic outlook regarding the
upcoming holiday season.

Real Estate and Construction.

Residential brokers indicated that sales softened in October
through mid-November compared with September, but were flat to slightly
up compared with weak levels from last year. Several brokers noted that
potential buyers continued to face challenges securing financing, while
others said that deals were falling through because of changes to
appraised values or negative inspection results. Contacts continued to
report declining home inventories; however, despite fewer available
homes, foreclosures and elevated levels of bank-owned properties
continued to put downward pressure on home prices. District brokers
anticipate sales growth to be flat over the next several months.

District homebuilders indicated that new home sales and
construction activity were flat to slightly down from the previous month
and were slightly below weak levels from a year ago. Homebuilders
continued to report that new home prices were largely unchanged compared
with the previous month and a year ago. Builders anticipate
single-family home construction activity to remain flat over the next
several months. New activity in multifamily construction was reported in
several District states. Contacts in South Florida signaled that
condominium development was expected to get underway soon because of
strong demand from foreign investors, many of whom pay with cash.
Developers plan to cover costs by requiring a significant upfront
payment from the purchasers before construction begins. The outlook for
new home sales growth over the next several months was flat to slightly
up compared with last year’s weak levels.

The majority of District commercial real estate contacts noted
modest improvement in nonresidential construction and leasing activity.
Brokers reported that vacancy rates declined and that rents have begun
to stabilize across much of the District. Contractors cited a small
improvement in construction activity from earlier in the year. Most
anticipate commercial real estate conditions to remain largely unchanged
over the next several quarters.

Manufacturing and Transportation.

Overall, District manufacturing activity weakened slightly from
October through mid-November. Contacts reported a slight increase in new
orders, and production improved modestly. Logistics firms noted that
retailers had adopted vendor-managed inventories, requiring the supplier
to hold inventories until products were ready to be sold. Some
manufacturers indicated they were more likely to produce and distribute
on a made-to-order basis rather than taking the chance of being caught
with excess inventory.

Transportation companies reported that demand flattened across most
industries. Few expect a significant increase in shipment volumes for
the holidays compared with last year. Railway firms cited strong
automotive shipments and very strong levels of coal cargoes destined for
export. Air cargo carriers noted that they have lowered freight
projections for the year because of lower demand and higher fuel costs.
A few contacts anticipated modest capacity cuts in the near term.

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

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