January 15, 2025

Southeast Economy Holds Steady

The new Beige Book from the Federal Reserve Bank of Atlanta describes mostly more of the same in the southeastern economy: modest growth, steady employment, and mixed pricing power for businesses.

The Beige Book is a compilation of anecdotal feedback from business contacts across the six states of the Sixth Federal Reserve District: Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. This edition covers the period from mid-November through the end of December.

In the labor market, firms broadly speaking held their employment levels even and anticipate keeping them that way in the coming weeks. At the same time, there were a few reports both of companies that will reduce staffing, mainly through attrition, and of firms that are hiring for growth. Business leaders said they think an ample supply of available labor will persist in the coming months.

Contacts generally reported mild price increases, as insurance and labor remained the principal areas of concern. Even relatively modest increases in insurance costs created cost pressures for firms. Many employers planned to pass on increases in health insurance costs to employees, while they figured to pass hikes in other types of insurance through to final prices. Firms pointed to diversified supply chains as a potential buffer to proposed tariffs.

In other economic sectors:

• Retailers reported better-than-expected holiday sales, particularly of luxury goods. Already strong spending on entertainment rose, and there was some softness in quick-service restaurants as ticket sizes shrank, even as middle- and higher-end restaurants reported solid demand.
• In spite of elevated mortgage interest rates and home prices, housing sales increased modestly over the reporting period. With some exceptions, existing home supply improved significantly throughout the District.
• In the transportation industry, ports reported continued increases in container volumes and "roll-on/roll-off" cargo, which is mainly vehicles. However, a potential East Coast port strike remains a risk. Transportation contacts noted uncertainty over future trade policy, the regulatory environment, and insurance costs.
• Overall manufacturing activity continued to decline slightly. In the Atlanta Fed's Business Inflation Expectations manufacturing sector report, more than two-thirds of respondents said demand remained the same or fell over the past year.
• Financial institutions reported moderate loan growth, fueled by increases in multifamily loans and first-lien mortgages.
• In the energy sector, utility contacts noted that in the short term, rising demand propelled by data center development will be met with a combination of natural gas, renewables, battery energy storage systems, and perhaps by keeping coal-fired plants running longer than expected.
• Demand for agricultural products declined a bit, and many farmers struggled to rebuild after hurricanes.

The Federal Reserve publishes the Beige Book before each meeting of the policymaking Federal Open Market Committee. Its next meeting is January 28 and 29.