Beige Book: Tourism Roars On as Overall Activity Holds Steady

March 06, 2024

Economic activity across the Southeast was little changed from the prior six weeks during January through mid-February, according to the new Beige Book anecdotal report of business conditions from the Federal Reserve Bank of Atlanta.

Firms reported steady hiring even as finding quality workers remained challenging. Many contacts said they employed various strategies to attract staff. Some firms partnered with educational institutions to tailor training programs. Some worked to contain costs by automating tasks, deploying generative artificial intelligence, and outsourcing professional services.

Meanwhile, most firms said upward pressure on wages eased, and wage growth rates were close to or only slightly higher than before the pandemic.

A notable bright spot in an otherwise static report was travel and tourism. Specifically, South Florida cruise lines continued to report healthy demand. And festivals, sporting events, business conferences and conventions drew big crowds, particularly in New Orleans, according to contacts. Tourism contacts were optimistic about the rest of the year, too.

Low-income consumers feeling the squeeze, trading down

In 2022, the Atlanta Fed introduced a section to the Beige Book called "Community Perspectives" to report on conditions in low- and moderate-income communities. It appears in every other edition.

The February community perspectives section reports that the discontinuation of pandemic-era programs such as enhanced child tax credit programs, emergency rental assistance, and extended Medicaid coverage, combined with rising prices, continued to weigh heavily on many households. Consequently, retailers and other consumer-facing contacts noted that many low- and moderate-income shoppers opted for less expensive items than they typically buy and sought extended payment terms.

In other economic sectors:

• Most nonlabor input cost increases continued to slow, but cost levels broadly remained elevated. Technology, labor, and especially insurance cost increases were the most frequently cited inflationary concerns.
• In line with previous reports, retailers described consumers as price conscious. Contacts viewed that trend not as a pronounced break with previous patterns but as an ongoing return to normal.
• As mortgage rates retreated from cyclical highs, housing affordability improved throughout the Southeast. Nonetheless, home sales in most major markets ended 2023 well below seasonal norms and prepandemic levels.
• In commercial real estate, office markets continued to struggle with declining rents, lower occupancy, and increased concessions to keep tenants. Most market segments, particularly multifamily residential and industrial, are likely to remain under pressure as new buildings are completed.
• Transportation activity was mixed. Ports remained busy, though volumes were down from pandemic-era peaks. Trucking contacts reported significantly reduced volumes, and railroad executives said that after a slowdown last year, some classes of freight volumes stabilized, including chemicals and forest products.
• Manufacturing activity slowed a bit but remained broadly healthy. Producers of consumer goods reported declines in orders and higher inventories, while makers of products for the technology industry and government projects indicated strong demand.
• Bank lending showed little to no growth compared to the previous six-week cycle amid tighter underwriting standards and weaker loan demand. Lending to builders of multifamily housing was the only segment that showed notable growth, contacts said.
• In the energy industry, contacts reported that maintenance shutdowns and severe weather curtailed refining capacity. As a result, crude oil inventories accumulated, constraining supplies to the marketplace, temporarily placing upward pressure on prices. Meanwhile, contacts expressed optimism about clean energy investments stemming from tax credits in the Inflation Reduction Act.

The Federal Reserve produces the Beige Book before each meeting of the Federal Open Market Committee. The next meeting is March 19 and 20.

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