About
The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
June 25, 2014
The Growing Gulf Coast: Good Signs despite Low Sales
The weather is not the only thing about to heat up along the Gulf Coast. The economy is warming up as well, according to the Regional Economic Information Network’s (REIN) contacts. The REIN team in the Atlanta Fed’s New Orleans Branch reaches out to leaders from large and small businesses from all sectors of the economy and to representatives from community groups along the Gulf Coast in order to gain a representative picture of regional economic conditions, which, by the way, appears to be markedly improving. Since mid-April, we’ve held 15 one-on-one interviews, one roundtable with a mix of business leaders, our branch board meeting, and we also attended several conferences.
According to our contacts, business sentiment has picked up. Most of them were optimistic about near-term (three to six months) and medium-term (two to three years) growth and were more confident in their outlook than in the recent past. Of contacts who indicated they were experiencing second quarter growth, approximately half believed the growth was a rebound from an unusually weak first quarter, with the other half attributing it to a modest increase in economic strength.
Burgeoning capital investment was a consistent recent theme. A lack of “visibility”—or a firm’s ability to confidently predict future business conditions—was not reported as a significant inhibitor of capital investment. Nearly every contact shared information about merger and acquisition (M&A) activity or capital expenditure projects under way or planned for 2014. Most projects involved expansion to meet growing demand, including constructing new facilities and upgrading existing ones, although several projects involved new product offerings. Consistent with the recent trend along the Gulf Coast, much of the increased investment stemmed from the energy sector. However, we noticed investment picked up in other industries, such as in education and medical services.
Business contacts also reported that spending on consulting services for leadership development and organizational culture training increased. The addition of new leaders, M&A activity that resulted in conflicting organizational cultures, and the recession-era deferral of discretionary spending generated a surge in demand for these services.
Residential real estate across the Gulf Coast picked up marginally since mid-April. The median residential home sale was around $200,000, though inventories were low. Homes in coastal Alabama’s high-end market (over $600,000) were slow to move, and a lack of high-end inventory in coastal Mississippi led to increased construction in that market. In past months, we heard reports of an increase in raw land deals along the Florida Panhandle, and similarly, a recent reemergence of raw land deals was reported in coastal Alabama, often 50 percent bank-financed with fully collateralized loans. Commercial construction also resurfaced in parts of the region.
Resting retail
Unfortunately, the general optimism was not shared by all sectors. Regional retail contacts shared dampened expectations for the second quarter. Some admitted to difficulty adjusting to a shopping landscape increasingly dominated by the internet, which forced big-box retail stores to rethink sales strategies and reevaluate store locations and sizes and in some cases led to resurgence in the redevelopment of shopping centers.
Bracing for the boom
The employment picture was heartening, with nearly all of our contacts implementing hiring plans. In fact, a few contacts who took steps to reduce employment to “lean and mean” levels during the recession and early recovery admitted they were not so sure the decision was advantageous, and recently they saw productivity increase significantly once they added workers. However, the continued shortage of skilled labor has many contacts worried that some project start dates may be pushed back as they struggle to find qualified people.
Most contacts continued to report isolated wage pressures for skilled labor, medical services, and professional jobs, though some expressed they are bracing themselves for significant wage pressure in the coming months as the economy picks up.
The chatter about plans to increase prices in recent months materialized into reports of price increases, yet contacts admitted the increases were challenging and required a great deal of negotiating.
Overall, the Gulf Coast economy appears to be rising out of the recessionary fog and shedding the winter frost. The picture across most industries was definitively positive, with reports of large investment projects, hiring plans, and price increases.
By Adrienne Slack, vice president and regional executive; Rebekah Durham, economic policy analysis specialist; and Harrison Grieb, economic intern, Regional Economic Information Network, all in the New Orleans Branch of the Atlanta Fed
June 20, 2014
Southeast Commercial Construction Picks Up the Pace
Each quarter, the Atlanta Fed conducts a poll of Southeast business contacts engaged in commercial construction in an effort to keep a close eye on construction activity. The latest results revealed that the positive momentum noted in the previous quarter was sustained through the first quarter of 2014.
The majority of commercial construction business contacts indicated that the pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).
Associated Builders and Contractors Inc., a national construction industry trade organization, conducts a survey of its own called the Construction Backlog Indicator, or CBI. The survey measures the amount of work that will be performed by commercial and industrial contractors in the months ahead. While CBI data are only available through the fourth quarter of 2013, it seems to be telling a similar story to the one our contacts are telling: that the pipeline of construction activity is building up.
The number of respondents reporting that the amount of available credit met or exceeded demand increased from earlier reports (see the chart). Sixty percent of contacts in the first quarter of 2014 indicated that credit was sufficient to meet demand, compared with 58 percent the previous quarter and only 31 percent one year earlier.
Most contacts indicated that they plan to increase hiring during the next quarter (see the chart). Seventy-nine percent of contacts in the first quarter of 2014 reported that they were planning to undertake modest to significant hiring, compared with 58 percent the previous quarter and 64 percent one year earlier.
Compared with one year earlier, more contacts (nearly three out of four) indicated that they were having a difficult time filling positions (see the chart).
This result is also consistent with reports from national trade organizations. In an April 4 press release, the Associated General Contractors of America warned that “the pool of available workers is declining rapidly, raising the prospects for significant labor shortages if demand continues to expand.”
Summarizing the information
The key first quarter 2014 findings show that commercial construction activity was increasing, the level of backlog was growing, that the amount of available credit met or exceeded demand, and that firms plan to hire additional employees during the next quarter. While it was a fairly positive report on the whole, the one finding that could prove problematic was that contacts were having a difficult time filling positions.
Note: First quarter 2014 poll results were collected April 7–16, 2014, and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
May 30, 2014
Southeast Housing Update: Sales, Prices, Construction Activity Spring Forward
The Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts in an effort to detect emerging real estate trends prior to the release of official government and other statistics. According to the April 2014 Southeast Housing Market Poll results:
- There was a rebound in the number of brokers and builders reporting that home sales had increased from the year-earlier level.
- More brokers but fewer builders noted that buyer traffic had increased from a year earlier.
- Most brokers continued to indicate that inventory levels were down from the year-earlier level. The report from builders was split down the middle—half of respondents said that new home inventories increased from the year-earlier level, the other half noted new home inventory levels had fallen.
- The vast majority of brokers and builders continued to report that home prices increased from a year earlier.
- There was a rebound in the number of builders reporting that construction activity had increased from the year-earlier level.
To explore the latest poll results in more detail, please visit our Construction and Real Estate Survey results.
Note: April poll results are based on responses from 35 residential brokers and 26 homebuilders and were collected May 5–14, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity; negative values indicate decreased activity.
If you would like to participate in this poll, you may sign up here.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
May 9, 2014
Is Florida Finally Beginning to Flourish Again?
In March, we shared the view of our contacts in the Regional Economic Information Network (REIN) in north and central Florida. Those contacts described modest but sustained growth in activity in the first quarter of the year. That sentiment continued as winter turned into spring, with reports of increasing activity and greater optimism for continued growth during the remainder of the year.
Since mid-March, the REIN team in the Atlanta Fed’s Jacksonville Branch held 13 one-on-one interviews, one roundtable with a mix of business leaders, a Trade and Transportation Advisory Council meeting (recently summarized), as well as our branch board meeting. Although meeting participants noted acquisitions as a primary growth engine for most firms, some firms are expanding capacity to meet improving demand. Community banks are reporting increased commercial activity as bigger banks trim lines on small businesses. Though loan demand is still relatively soft, our contacts characterized clients as somewhat more confident, which bodes well for future lending activity. One banker cited noteworthy increases in credit card usage and home equity loans.
Retail contacts continue to express concerns about low-income consumers but note that the slowly improving labor market is resulting in somewhat more spending. In central Florida, contacts noted strong spending by more affluent consumers, including foreign visitors who are seeking high-end retail and dining. Robust home sales and price appreciation, accompanied by declining lender-mediated sales, were widely reported. Commercial construction is on the rise, especially in sectors such as health care, manufacturing, apartments, and higher education.
A focus on cost-cutting along with productivity-enhancing efforts continues. As one chief executive officer put it, “People are the last thing we’ll invest in.” Another company has committed to keeping its general and administrative expenses flat, which will result in support staff cuts to offset the increased cost of technology investments and health care. Two other large contacts noted significant reductions of full-timers to avoid having to provide health care coverage and to “be more in line with the industry.” We increasingly hear more about firms restructuring employee health plans and benefits to reduce costs to the company, including shifting more cost burden to the employee, restricting eligibility for spouses who may have access to insurance elsewhere, and adding risk-based surcharges.
Education contacts noted that the ability to place graduates seeking work has improved. Stories abound regarding difficult-to-fill positions (truck drivers, IT, accounting, etc.), and reports of a willingness to increase starting salaries are mixed. Generally, there were few reports of wage pressures mounting (outside of the trucking industry). The news on input prices remains relatively quiet.
Our contacts noted that qualified mortgage rules—and regulations more generally—have the potential to affect the housing recovery. A mortgage and refinance company has cut the majority of its workforce as refinance volume diminishes but noted that current regulations are making first mortgages, especially to the self-employed, “nearly impossible” to issue. Two other small-banking contacts indicated they have discontinued providing residential mortgages. However, two residential real estate contacts did not indicate any major concern about clients’ abilities to obtain mortgage loans.
At the April meeting of the board of directors of the Jacksonville Branch, we asked board members whether the current and near-term environment reflects an economy that is growing at a 2 percent rate or one that is growing at 3 percent. The majority view activity now and in the coming year to be more closely aligned with a 3 percent growth rate. The board members feel that the biggest potential impediment to growth is related to the consumer, as many people continue to struggle and consumer confidence remains lower than before the recession (see the chart).
The old proverb goes, “No matter how long the winter, spring is sure to follow.” One could apply this adage to the Great Recession and the long recovery and ask: Has an economic “spring” finally sprung? We’ll be keeping tabs as the year plays out.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
June 25, 2014
The Growing Gulf Coast: Good Signs despite Low Sales
The weather is not the only thing about to heat up along the Gulf Coast. The economy is warming up as well, according to the Regional Economic Information Network’s (REIN) contacts. The REIN team in the Atlanta Fed’s New Orleans Branch reaches out to leaders from large and small businesses from all sectors of the economy and to representatives from community groups along the Gulf Coast in order to gain a representative picture of regional economic conditions, which, by the way, appears to be markedly improving. Since mid-April, we’ve held 15 one-on-one interviews, one roundtable with a mix of business leaders, our branch board meeting, and we also attended several conferences.
According to our contacts, business sentiment has picked up. Most of them were optimistic about near-term (three to six months) and medium-term (two to three years) growth and were more confident in their outlook than in the recent past. Of contacts who indicated they were experiencing second quarter growth, approximately half believed the growth was a rebound from an unusually weak first quarter, with the other half attributing it to a modest increase in economic strength.
Burgeoning capital investment was a consistent recent theme. A lack of “visibility”—or a firm’s ability to confidently predict future business conditions—was not reported as a significant inhibitor of capital investment. Nearly every contact shared information about merger and acquisition (M&A) activity or capital expenditure projects under way or planned for 2014. Most projects involved expansion to meet growing demand, including constructing new facilities and upgrading existing ones, although several projects involved new product offerings. Consistent with the recent trend along the Gulf Coast, much of the increased investment stemmed from the energy sector. However, we noticed investment picked up in other industries, such as in education and medical services.
Business contacts also reported that spending on consulting services for leadership development and organizational culture training increased. The addition of new leaders, M&A activity that resulted in conflicting organizational cultures, and the recession-era deferral of discretionary spending generated a surge in demand for these services.
Residential real estate across the Gulf Coast picked up marginally since mid-April. The median residential home sale was around $200,000, though inventories were low. Homes in coastal Alabama’s high-end market (over $600,000) were slow to move, and a lack of high-end inventory in coastal Mississippi led to increased construction in that market. In past months, we heard reports of an increase in raw land deals along the Florida Panhandle, and similarly, a recent reemergence of raw land deals was reported in coastal Alabama, often 50 percent bank-financed with fully collateralized loans. Commercial construction also resurfaced in parts of the region.
Resting retail
Unfortunately, the general optimism was not shared by all sectors. Regional retail contacts shared dampened expectations for the second quarter. Some admitted to difficulty adjusting to a shopping landscape increasingly dominated by the internet, which forced big-box retail stores to rethink sales strategies and reevaluate store locations and sizes and in some cases led to resurgence in the redevelopment of shopping centers.
Bracing for the boom
The employment picture was heartening, with nearly all of our contacts implementing hiring plans. In fact, a few contacts who took steps to reduce employment to “lean and mean” levels during the recession and early recovery admitted they were not so sure the decision was advantageous, and recently they saw productivity increase significantly once they added workers. However, the continued shortage of skilled labor has many contacts worried that some project start dates may be pushed back as they struggle to find qualified people.
Most contacts continued to report isolated wage pressures for skilled labor, medical services, and professional jobs, though some expressed they are bracing themselves for significant wage pressure in the coming months as the economy picks up.
The chatter about plans to increase prices in recent months materialized into reports of price increases, yet contacts admitted the increases were challenging and required a great deal of negotiating.
Overall, the Gulf Coast economy appears to be rising out of the recessionary fog and shedding the winter frost. The picture across most industries was definitively positive, with reports of large investment projects, hiring plans, and price increases.
By Adrienne Slack, vice president and regional executive; Rebekah Durham, economic policy analysis specialist; and Harrison Grieb, economic intern, Regional Economic Information Network, all in the New Orleans Branch of the Atlanta Fed
June 20, 2014
Southeast Commercial Construction Picks Up the Pace
Each quarter, the Atlanta Fed conducts a poll of Southeast business contacts engaged in commercial construction in an effort to keep a close eye on construction activity. The latest results revealed that the positive momentum noted in the previous quarter was sustained through the first quarter of 2014.
The majority of commercial construction business contacts indicated that the pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).
Associated Builders and Contractors Inc., a national construction industry trade organization, conducts a survey of its own called the Construction Backlog Indicator, or CBI. The survey measures the amount of work that will be performed by commercial and industrial contractors in the months ahead. While CBI data are only available through the fourth quarter of 2013, it seems to be telling a similar story to the one our contacts are telling: that the pipeline of construction activity is building up.
The number of respondents reporting that the amount of available credit met or exceeded demand increased from earlier reports (see the chart). Sixty percent of contacts in the first quarter of 2014 indicated that credit was sufficient to meet demand, compared with 58 percent the previous quarter and only 31 percent one year earlier.
Most contacts indicated that they plan to increase hiring during the next quarter (see the chart). Seventy-nine percent of contacts in the first quarter of 2014 reported that they were planning to undertake modest to significant hiring, compared with 58 percent the previous quarter and 64 percent one year earlier.
Compared with one year earlier, more contacts (nearly three out of four) indicated that they were having a difficult time filling positions (see the chart).
This result is also consistent with reports from national trade organizations. In an April 4 press release, the Associated General Contractors of America warned that “the pool of available workers is declining rapidly, raising the prospects for significant labor shortages if demand continues to expand.”
Summarizing the information
The key first quarter 2014 findings show that commercial construction activity was increasing, the level of backlog was growing, that the amount of available credit met or exceeded demand, and that firms plan to hire additional employees during the next quarter. While it was a fairly positive report on the whole, the one finding that could prove problematic was that contacts were having a difficult time filling positions.
Note: First quarter 2014 poll results were collected April 7–16, 2014, and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
May 30, 2014
Southeast Housing Update: Sales, Prices, Construction Activity Spring Forward
The Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts in an effort to detect emerging real estate trends prior to the release of official government and other statistics. According to the April 2014 Southeast Housing Market Poll results:
- There was a rebound in the number of brokers and builders reporting that home sales had increased from the year-earlier level.
- More brokers but fewer builders noted that buyer traffic had increased from a year earlier.
- Most brokers continued to indicate that inventory levels were down from the year-earlier level. The report from builders was split down the middle—half of respondents said that new home inventories increased from the year-earlier level, the other half noted new home inventory levels had fallen.
- The vast majority of brokers and builders continued to report that home prices increased from a year earlier.
- There was a rebound in the number of builders reporting that construction activity had increased from the year-earlier level.
To explore the latest poll results in more detail, please visit our Construction and Real Estate Survey results.
Note: April poll results are based on responses from 35 residential brokers and 26 homebuilders and were collected May 5–14, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity; negative values indicate decreased activity.
If you would like to participate in this poll, you may sign up here.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
May 9, 2014
Is Florida Finally Beginning to Flourish Again?
In March, we shared the view of our contacts in the Regional Economic Information Network (REIN) in north and central Florida. Those contacts described modest but sustained growth in activity in the first quarter of the year. That sentiment continued as winter turned into spring, with reports of increasing activity and greater optimism for continued growth during the remainder of the year.
Since mid-March, the REIN team in the Atlanta Fed’s Jacksonville Branch held 13 one-on-one interviews, one roundtable with a mix of business leaders, a Trade and Transportation Advisory Council meeting (recently summarized), as well as our branch board meeting. Although meeting participants noted acquisitions as a primary growth engine for most firms, some firms are expanding capacity to meet improving demand. Community banks are reporting increased commercial activity as bigger banks trim lines on small businesses. Though loan demand is still relatively soft, our contacts characterized clients as somewhat more confident, which bodes well for future lending activity. One banker cited noteworthy increases in credit card usage and home equity loans.
Retail contacts continue to express concerns about low-income consumers but note that the slowly improving labor market is resulting in somewhat more spending. In central Florida, contacts noted strong spending by more affluent consumers, including foreign visitors who are seeking high-end retail and dining. Robust home sales and price appreciation, accompanied by declining lender-mediated sales, were widely reported. Commercial construction is on the rise, especially in sectors such as health care, manufacturing, apartments, and higher education.
A focus on cost-cutting along with productivity-enhancing efforts continues. As one chief executive officer put it, “People are the last thing we’ll invest in.” Another company has committed to keeping its general and administrative expenses flat, which will result in support staff cuts to offset the increased cost of technology investments and health care. Two other large contacts noted significant reductions of full-timers to avoid having to provide health care coverage and to “be more in line with the industry.” We increasingly hear more about firms restructuring employee health plans and benefits to reduce costs to the company, including shifting more cost burden to the employee, restricting eligibility for spouses who may have access to insurance elsewhere, and adding risk-based surcharges.
Education contacts noted that the ability to place graduates seeking work has improved. Stories abound regarding difficult-to-fill positions (truck drivers, IT, accounting, etc.), and reports of a willingness to increase starting salaries are mixed. Generally, there were few reports of wage pressures mounting (outside of the trucking industry). The news on input prices remains relatively quiet.
Our contacts noted that qualified mortgage rules—and regulations more generally—have the potential to affect the housing recovery. A mortgage and refinance company has cut the majority of its workforce as refinance volume diminishes but noted that current regulations are making first mortgages, especially to the self-employed, “nearly impossible” to issue. Two other small-banking contacts indicated they have discontinued providing residential mortgages. However, two residential real estate contacts did not indicate any major concern about clients’ abilities to obtain mortgage loans.
At the April meeting of the board of directors of the Jacksonville Branch, we asked board members whether the current and near-term environment reflects an economy that is growing at a 2 percent rate or one that is growing at 3 percent. The majority view activity now and in the coming year to be more closely aligned with a 3 percent growth rate. The board members feel that the biggest potential impediment to growth is related to the consumer, as many people continue to struggle and consumer confidence remains lower than before the recession (see the chart).
The old proverb goes, “No matter how long the winter, spring is sure to follow.” One could apply this adage to the Great Recession and the long recovery and ask: Has an economic “spring” finally sprung? We’ll be keeping tabs as the year plays out.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
Southpoint Search
Recent Posts
Categories
- Agriculture
- Alabama
- Atlanta
- Automobiles
- Banks and banking
- Beige Book
- Business Cycles
- Commodity Prices
- Construction
- Consumer Savings
- Data Releases
- Disaster recovery
- Economic conditions
- Economic Growth and Development
- Economic Indicators
- Economy
- Education
- Employment
- Energy
- Entertainment
- Europe
- Exports
- Fiscal Policy
- Florida
- Forecasting
- Forecasts
- Foreclosure
- Forestry
- GDP
- Georgia
- Green
- Growth
- Gulf Coast
- Health Care
- Holiday
- Holiday Sales
- Housing
- Hurricanes
- Inflation
- International
- Inventories
- Jobs
- Katrina
- Labor Markets
- Local Economic Analysis and Research Network LEARN
- Logistics
- Louisiana
- Manufacturing
- Metropolitan
- Mississippi
- Monetary Policy
- Nashville
- Natural Disasters
- New Orleans
- Oil
- Oil Spill
- Outlook
- Poultry
- Prices
- Productivity
- Purchasing
- Real Estate
- Recession
- Recovery
- Retail
- Rural
- Sales Tax
- Shipping
- Southeast
- Sports
- Taxes
- Technology
- Tennessee
- Tourism
- Trade
- Transportation
- Travel
- Uncategorized
- Unemployment
- Weather