Beige Book: Economic weakness in Southeast continues
Birmingham Business Journal
July and August brought more of the same economic weakness, according to the Federal Reserve's Beige Book report published this week.
Southeast merchants said sales were below expectations for July and August, with inventories higher than a year earlier. Most expect sales to remain flat or decline in the near term as the stimulus from the tax rebate wanes. Auto sales continued to worsen, with lower sales across most sub-compact vehicle types, Southeast dealers said.
Homebuilders and Realtors reported new and existing home sales remained below year-earlier levels for July and August. Sales activity was mixed, but weakness was most pronounced among Georgia builders. The majority of builders reported that construction was significantly lower than a year earlier. Overall, new home inventories continued to fall while existing home inventories rose slightly.
Home prices continued to decline across much of the Southeast. The outlook for residential sales and construction over the next several months remained subdued; however, most contacts did not anticipate further significant weakening.
Most commercial contractors noted declines in construction activity on a year-over-year basis. Vacancy rates among all commercial property types continued to rise in most parts of the Southeast. Overall, commercial contractors anticipate development activity will remain restrained at least through the first quarter of 2009.
Manufacturers saw slight declines in production for July and August. Many reported cutbacks in employment and hours. Construction-related firms reported very weak conditions. A larger proportion of contacts said that higher prices for raw materials and energy were being passed through to customers than in previous Beige Book reports.
Most banking contacts in the Southeast reported that credit standards remained tight during July and August. Many banks adjusted rates upward according to risk, required larger down payments and higher credit scores, lowered loan-to-value requirements, and stipulated that new loan customers open deposit accounts. Consumer loan demand ranged from being steady to down. Banks said funding remains an issue and retail deposit competition remains strong.
Southeast businesses continued to note higher input prices mostly tied to higher energy costs, although increases in the prices of metals, food and fertilizers were also noted. Higher fuel prices continued to have a negative effect on the profitability of regional freight and passenger transportation firms.
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