Beige Book: Economic slide deepens
Atlanta Business Chronicle
Deteriorating retail spending, declines in the housing market and the national economic woes helped drag the Southeast economy into deeper weakness in October through mid-November, according to the Federal Reserve's Beige Book report published Dec. 3.
Retailers across the region were more pessimistic in October and early November than in earlier fall. While households benefited from declines in gasoline prices, this did not appear to be enough to boost overall retail spending, Beige Book noted. Sales activity heading into the holiday season was described as weak, and expectations for December sales were somber. The majority of retail contacts reported that inventories were above plan.
To boost sales, several retailers noted they have expanded store hours, increased advertising and plan deeper discounts. Some stores have begun to offer layaways as an incentive for budget-conscious shoppers who are unable or unwilling to use credit.
Homebuilders and Realtors confirmed new and existing home sales remained weak in October through mid-November. Many reported worsening employment conditions and the unavailability of financing was restraining sales. Southeast homebuilders continued to pull back on construction in the face of historically high inventory numbers. Home prices continued to soften and the large volume of foreclosed properties for sale was exerting downward pressure on new and existing home prices.
Commercial contractors in the Southeast also continued to report declines in activity. More projects were postponed or canceled because of funding constraints and weak economic conditions. Nonetheless, more existing space had been put back into the commercial real estate market, particularly in retail. Softer leasing demand and construction declines are expected.
The Southeast baking sector reported business and consumer lending activity decreased. Credit conditions remained tight and competition for deposits increased. Some contacts, especially in the real estate industry, observed the restricted access to credit was forcing them out of business. Most banking contacts indicated that they did not expect credit conditions to change materially in the near-term as banks focused on repairing their damaged balance sheets.
There were declines in the manufacturing sector’s production and new orders during October and early November. The decline in production was exacerbated by a decrease in export demand. Most expect weak conditions to persist into the new-year.
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