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Atlanta: June 1970

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Beige Book Report: Atlanta

June 17, 1970

Summary of Findings
Sixth District directors have mixed opinions about future business conditions. If any consensus exists, it is that the economy has not yet bottomed out and that recovery will be less than spectacular when it comes. According to directors' reports and other sources of information, further weakening in sales, employment and production is likely. Department stores report lower volume and growing resistance to higher priced merchandise. Belt tightening by businesses has spread, and directors report many instances of slowdowns in capital spending. Employment and production cutbacks are common.

Retail sales
Department stores surveyed report no discernible shift from the "upstairs" to the "bargain basement". However, customer resistance to higher priced brands has increased, with lower priced merchandise receiving the benefit. A canvass of merchants by one of our Branch offices indicated that they expect no improvement in sales within the near future. Regarding auto sales, distributors contacted report some shifting from larger cars to the compact sized, loaded with optional equipment. Rather than settling for a stripped-down version of a full-sized car, customers are purchasing lower priced equipment-packed models.

Belt tightening
A profit squeeze is causing many businesses to trim fat wherever possible. Reports of capital expenditures being reduced or stretched out have been coming from several sources. A major airline reports more executives are flying coach, and some companies are pushing early retirements. Attrition is being allowed to take its toll, and the workweek is being reduced in some industrial areas.

Production and employment
Cutbacks—some sizable—are occurring in steel, furniture, textiles, and rubber and paper products. A large steel producer in Alabama and a large aluminum company in Tennessee are reportedly cutting employment by as much as 20 percent. A Mississippi furniture manufacturer is reported to be trimming employment from 2,800 to 1,700. A 500-man cutback is imminent at another firm, and a District bank is cutting employment—this one by 10 percent across the board. A regional airline is cutting its work force by 100, "purely as an economy move". A shorter workweek has also been used to adjust output: for example, a major rubber company is going on a four-day week.

A strike involving 5,000 workers at the Atomic Energy Commission's Oak Ridge, Tennessee, plant is entering its third month. Gulf states utilities continue to be picketed, and a walkout involving 1,200 has idled production at a Birmingham plant. The Florida Power and the Miami plumbers' strikes have been settled. The plumbers will receive about a 25 percent yearly pay boost over the three-year contract. Employment is stabilizing at two large military installations contacted. Recent employment cutbacks at these two installations have been accomplished by normal attrition.

Capital spending and construction
Major utility construction is strong and a twenty-story office building will be built in Jackson, Mississippi. Despite postponements in capital spending, there have been some announcements of new plants and plant expansions, including a needle factory in Alabama, a $70 million expansion of a mining and industrial chemical complex in Tennessee, and a $15 million expansion of an engine plant in south Alabama. Recent contacts with four Atlanta building supply companies—two in glass and one each in cabinets and plumbing supplies—indicate reduced volume and price cutting.

Agriculture
Soaking rains throughout the District have contributed to an excellent agricultural outlook. Prices of farm land have leveled recently after a steady rise, perhaps because of uncertainty about farm legislation and high interest rates.

Loan terms
A recent survey indicates a slight decline in the average interest rate on bank loans from February 15 to May 15. Firmer nonprice terms, however, nullified the effects of the lower interest rate. Loan demand has weakened slightly.