WASHINGTON (MNI) – The following is the first part of the text of
the Atlanta section of the Federal Reserve’s Beige Book report on
current financial conditions released Wednesday:

SIXTH DISTRICT – ATLANTA

Summary. Sixth District business contacts described economic
activity as expanding at a modest pace from late November through
December. Reports from most sectors were positive, yet expectations
remained guarded. Holiday sales were described by most retailers as
generally positive and the pace of sales was stronger than last year by
most accounts. Auto sales remained strong as well. Tourism-related
spending was solid as international visitors continued to bolster
activity. Weakness persisted in the residential real estate sector as
both brokers and homebuilders continued to report downward pressure on
prices for new and existing homes. Commercial contractors noted a slight
improvement in demand compared with earlier in the year. Most
manufacturers and transportation contacts noted positive activity,
especially related to exports. Bankers noted that deposit growth
continued to outpace loan demand. Employment growth was positive but
tepid across the District as employers remained cautious with regard to
hiring. Concerns over increased input costs eased further as most
commodity prices leveled off and business’ inflation expectations
remained in check. Few contacts reported having significant pricing
power.

Consumer Spending and Tourism. District retail contacts noted that
sales and traffic in late November and December were up from a year ago.
Post-Thanksgiving reports were generally positive; nearly sixty percent
of contacts polled indicated that sales were better than the same time
period last year. Almost half of contacts reported that inventory levels
were up slightly compared to last month, but most were satisfied that
current levels were appropriate. High-end and outlet stores were
specifically identified as doing well and were posting improved profits.
Most merchants polled expect overall sales to improve over the next
three months. Auto dealers indicated that sales continued to be strong
because of pent-up demand and are better positioned to obtain financing;
the pace of sales during early November and December was reportedly the
strongest in over two years.

Hospitality contacts reported that holiday activity slightly
exceeded cautiously optimistic projections. Occupancy and room rates
were up throughout the District. South Florida in particular experienced
greater travel activity from Canada and South America. Airport traffic
remained above year-ago levels in most major District cities with
international travelers helping boost overall arrivals in many Florida
destinations. Cruise line reservations remained solid into the first
quarter of 2012 as international passengers took advantage of deals.
Business travel improved over year-ago levels, although reservations
were being made closer to departure dates. Real Estate and Construction.
Residential brokers indicated that sales continued to soften in late
November and December but remained ahead of last year’s weak levels.
However, sales growth varied somewhat across the region. Florida brokers
reported that sales growth, measured year-over-year, rebounded in
November after moderating slightly in the previous two months. These
sales continued to be driven by international and cash sales. Elsewhere
in the District, most brokers reported that sales were similar to weak
levels seen a year ago. Many contacts noted that appraisals remained
problematic. Inventories declined on a year-over-year basis. Brokers
continued to report downward pressure on home prices across most of the
District. Many anticipate modest sales growth over the next several
months with the most positive expectations coming from Florida brokers.

Reports from District homebuilders indicated that new home sales
and construction activity growth, measured year-over-year, were flat to
slightly up. Builders also continued to report downward pressure on home
prices with most reporting that prices were flat or down on a
year-over-year basis, in spite of inventories that remained below
year-earlier levels. Builders indicated a strong pickup in buyer traffic
compared with the same time period as last year. Homebuilders anticipate
new home sales and construction to improve modestly in the coming year.

The majority of District commercial real estate contacts continued
to report improving demand from earlier in the year. Brokers indicated
modest improvements in demand for space with some noting that rent
concessions had abated. Contractors continued to report improvements in
construction activity from earlier in the year. However, financing
remained challenging and most projects were build-to-suit. The outlook
among contacts improved modestly from early November with most
contractors and commercial real estate brokers anticipating that
construction activity will improve slowly during 2012. Manufacturing and
Transportation. On balance, District manufacturing contacts showed
notable improvements in both levels of new orders and production in
November after reporting several months of decelerating activity. In
addition, more contacts reported improving expectations for future
production than in previous reports. Export manufacturers and auto
producers, in particular, reported strong activity. Auto producers noted
that recent flooding in Thailand would likely have a modest, negative
impact on production of some models as several plants in that region
were damaged or forced to curtail operations for several weeks. Reports
from transportation industry contacts remained positive in late November
and December. Port authorities cited volume increases over last year
with notable strength in exports. Trucking firms continued to report
increased demand for their services but were struggling to meet customer
needs because of a significant shortage of long-haul drivers.

More:

(1 of 2)

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

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]