As the Southeast’s economy grew at a measured pace from mid-May through June, the heated labor market continued to cool and nonlabor costs further stabilized. Despite widespread tightening of credit standards, financial institutions reported ongoing growth in loan volumes, according to the newest Beige Book report of economic conditions in the Southeast from the Federal Reserve Bank of Atlanta.
Most Atlanta Fed business contacts said it was becoming easier to find and keep workers, and the majority of employers continued to hire. Still, numerous manufacturers said they were short-staffed and had employees working overtime to run factories at capacity. Other firms saw weakening demand but avoided laying off workers by slowing the pace of hiring or relying on attrition to shrink their workforce.
On the price front, food costs moderated because of decreases in freight and delivery costs. The cost of construction materials also declined as prices of commodities including steel and lumber neared pre-pandemic levels. Growing numbers of wholesalers reported pushback from clients on price hikes, and the Atlanta Fed’s Business Inflation Expectations survey showed year-over-year unit cost growth of 3.1 percent in June, a significant decline from 3.5 percent in May.
Meanwhile, financial institutions noted a slight decline in deposits as customers shifted money to alternatives paying higher interest. In response, institutions steadily increased interest rates on deposits.
In other sectors:
- Retailers described consumers as more value conscious since the previous Beige Book. Discretionary spending—on clothing, electronics, and recreation, for example—moderated as shoppers visited stores less often and curtailed impulse buying. However, spending on food and beverages, household essentials, and healthcare necessities rose.
- Contacts reported mixed conditions in commercial real estate. In particular, the office market was varied. Firms said activity in newer buildings was solid, while occupancy in older buildings fell as tenants moved to more contemporary locations.
- The goods transportation business slowed further as ocean shipping companies and seaports noted declines in container traffic. Those declines resulted from retailers having overstocked inventory, along with weaker global demand, according to Atlanta Fed contacts.
- Manufacturing contacts generally reported healthy conditions. Even those who noted slight decreases in demand described that as a return to normal as opposed to a troubling downturn.
The Federal Reserve publishes the Beige Book before each meeting of the Federal Open Market Committee. The committee is scheduled to meet July 25 and 26. The Atlanta Fed's Beige Book covers the Sixth Federal Reserve District, which includes Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee.
Charles Davidson
Staff writer for Economy Matters