As the Southeast sweltered through a summer of record heat, utility companies absorbed the intense demand for air conditioning without notable trouble, in part by investing in renewable energy to add production capacity, according to the new Beige Book report on economic conditions from the Federal Reserve Bank of Atlanta.
Broadly, the economy of the Reserve Bank's six-state district grew modestly from July through mid-August as labor availability remained a top concern among employers and prices generally showed signs of stabilizing.
The Beige Book assembles input from Atlanta Fed business and community contacts across Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee. During this six-week period, contacts in the energy industry reported particularly interesting developments. In ramping up production, they noted a strong move to bring modular plant construction back to the United States.
Contacts said some chemical, petrochemical, and liquefied natural gas companies had experienced late delivery and shoddy quality from projects moved offshore. That led to strong demand to "onshore" such modular construction, which typically involves building large, complex structures, transporting them to a site, then piecing them together with similar structures.
In labor markets, worker availability remains a concern—as it has for many months—though most contacts reported improvements in hiring and retention. In south Florida and on the Gulf Coast, executives said the cost of living, especially for housing, restricted worker supply. Some employers figure shortages of people with certain skills will persist. In response, they’re investing in automation to reduce reliance on what they described as a shrinking workforce.
In other sectors:
- Capital and credit deployment to small businesses slowed because of rising borrowing costs and tighter underwriting standards. However, lenders and investors said they expect small business capital to become more abundant with the roll out of federal programs like the State Small Business Credit Initiative.
- Property and liability insurance costs in coastal areas remained a top concern for housing affordability and firms' investment plans. Companies' ability to increase prices eroded, according to most contacts, though most reported holding prices steady as opposed to lowering them. News on the future path of inflation was promising as firms' inflation expectations for the year ahead decreased in August to 2.5 percent, on average, from 2.8 percent in July, according to the Atlanta Fed's Business Inflation Expectations survey.
- District retailers reported robust consumer spending powered by a strong job market. Demand for leisure travel slowed, though contacts viewed that as an expected return to normal activity after a spurt of pandemic-driven, pent-up demand.
- Concerns continued to mount in commercial real estate. Activity slowed in high-end multifamily units and industrial real estate. More contacts reported growing concerns about financing as lenders heightened underwriting standards and reduced funding commitments. Contacts reported challenges securing financing for office space, and transaction volume continued to decline. Finally, industry contacts noted growing uncertainty amid declining asset values.
- In transportation, trucking firms reported a continued slump in freight volumes, and e-commerce activity slowed. International air freight remained sluggish amid a global supply chain recovery and geopolitical issues that strained trade flows.
- District financial institutions reported sustained solid loan growth across most portfolios, with the notable exception of auto and other consumer loans. Most institutions have yet to report significant increases in delinquencies.
- In the agricultural sector, chicken supplies continued to exceed demand, although the market improved. Many row crops were expected to have a strong harvest, but demand for cotton remained sufficiently weak that some growers left the market.
The Federal Reserve publishes the Beige Book before each meeting of the policy-setting Federal Open Market Committee. The committee is scheduled to meet September 19 and 20.
Charles Davidson
Staff writer for Economy Matters