Two recent reports from the Federal Reserve Bank show robust overall economic activity in the Southeast, while manufacturing in the region declined. Consumers kept retailers busier during the summer than last year, especially with purchases of women's apparel and children's shoes and clothing. Commercial construction is on pace to finish the year slightly better than last year, but home sales were off in August compared to the previous year, according to contractors interviewed by the Atlanta Fed branch. Southeastern loan demand is rising at what Fed analysts termed a moderate rate, fueled mostly by consumer borrowing, while commercial lending is slowing. Prices remain generally stable, except in Florida, where managers told the bank's economists that import prices are beginning to rise as Asian markets improve.
Medical costs are rising at double-digit rates, the report notes.
The most negative news in the Beige Book is that tight labor markets are resulting in scattered areas of accelerating wages. For example, Georgia's unemployment rate in August was 3.9 percent, down from 4.1 percent in July and the lowest in nearly three decades. Rising wages could be the warning signal of potential inflation that members of the Federal Open Market Committee react to when they deliberate Oct. 5 to set interest rates for the Fed. That may be why plant managers questioned indicated many of their companies expect to raise prices within the next six months. Manufacturing production weakened in August from the same month in 1998.