Expect to see more of the growth in economic activity that is occurring in Central and South Mississippi, says a new Federal Reserve Beige Book that periodically assesses the economic health of the Atlanta Fed district and the 11 other districts.
The Beige Book, released Oct. 15, leads off with a note that the “modest pace” of economic improvement in the Atlanta district, which takes in Central and South Mississippi, should be sustained or even rise above current levels. The district also includes Alabama, Florida, Georgia, and portions of Louisiana and Tennessee.
“The outlook among firms remains largely optimistic with the majority of contacts expecting near-term growth to be sustained at or slightly above current levels,” Beige Book authors reported based on contacts with business owners and other knowledgeable sources in the region.
Economic growth nationwide, as reflected in the Gross Domestic Product, or GDP, has been at 3 percent for the last couple of quarters after showing practically zero growth in the year’s first quarter. The 3 percent growth should continue through the final quarter and the rest of 2015, said Dennis Lockhart, president of the Atlanta Fed, at a Sept. 19 address of the Mississippi Economic Education Council in Jackson.
In his talk, Lockhart said the “recent run of data” on the U.S. economy has been encouraging, with improvements in manufacturing, services and consumer and business confidence. The “tear” that manufacturing has been on lately should be especially good news for Mississippi with its big stake in automobile making, Lockhart said.
He cautioned, however, that the nation needs to see consistency in consumer spending. The new Beige Book says the consistency is occurring in the Atlanta District, though it said the improvements seen are only “slight.”
“District retailers reported a slight improvement in sales since the previous report” in early September, The Beige Book said. “Young shoppers were described as being confident and willing to spend, while older consumers were reportedly being more cautious.
“The battle between online sales versus brick-and-mortar store sales continued as merchants indicated that competition from rival stores’ online sales was having an adverse effect on in-store traffic. However, the outlook among retailers for the remainder of the year remains optimistic.”
The Atlanta District reported growth in real estate and construction in the past few weeks, with many brokers reporting that home sales met or exceeded expectations. The report noted as well that a majority of brokers indicated that inventory levels stayed flat or continued to decline on a year-over-year basis and home prices were ahead of their year-earlier levels.
Reports from builders in the multi-state district remained fairly positive, the Beige Book noted. Builders also reported modest home-price appreciation, the reported added.
Commercial real estate brokers across the district continued to report improving demand since the early September report. The improvement varied by metro area, sub-market and property type, the builders reported.
Manufacturing expanded across the Southeast since the early September reporting. Finished inventories rose and commodity prices continued to increase, the Beige report noted.
On the banking and finance front, credit demand was mixed and competition for high quality borrowers remained “very keen,” the Beige Book reported.
In reporting on employment, the Atlanta Fed said contacts noted that staffing levels were increasing, though slowly. The district added 51,100 jobs on net in August and the unemployment rate rose 0.2 percentage points to 6.9 percent, the Beige Book noted.
Nearly all states in the district added to payrolls in August, with the exception of Mississippi, which lost 4,600 jobs on net, the report said.
Businesses across the region continued to report difficulty finding qualified workers. Similar to the previous report, hiring challenges appeared to be both intensifying and broadening across the skill and occupation spectrums, according to the Beige Book report.
Contacts in the oil industry reported an excess supply of crude oil, with recent prices well below year-ago levels. Gulf Coast refinery utilization increased over the last year. Imports of crude oil fell; exports were slightly above year-ago levels, though some contacts expressed concern that the strength of the dollar has made U.S. oil exports more expensive for the rest of the world, according to the Beige Book.
Lockhart emphasized in his Jackson visit that it will be mid 2015 before the Open Markets Committee gives serious consideration to raising the Fed’s short term interest rate from the zero-to-one-quarter percent level it has been at since early 2007.
The committee of the 12 Fed chiefs met shortly before Lockhart’s arrival in Jackson. “They saw very little change in the outlook,” he said.
The Open Markets Committee is scheduled to meet eight times next year. Lockhart said he expects that at some point the panel will signal its intention of interest rates.
“I continue to expect conditions for liftoff to ripen by mid 2015 or later,” he said.
Full employment, based on a projected 3 percent GDP growth, could come by late 2016 or early 2017, according to Lockhart.
“I view GDP growth as a means to an end,” with full employment being the sough-after end, he said.
Lockhart said he is concerned about data that shows a growing number of men of prime working age who ceased looking for work over the last month. “It’s worrisome,” he said, and noted many of the men now “marginally-detached” from the job market previously worked in manufacturing and construction.
Meanwhile, the absence of inflation reflects weak wage growth and a lukewarm economy, Lockhart added. “There’s been no broad-based improvement or pressure on wages.”