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.