Beige Book Report: Atlanta
November 11, 1970
Our directors report a weakening, on balance, in the Sixth District economy. Layoffs, both related and unrelated to the General Motors strike, continue. Department store sales remain sluggish, and plant and equipment expenditures are off. Some large price increases have been proposed by gas utilities and by those providing such other public services as trash collection and water and sewer service. A cross-section of small Georgia banks report reduced demand for consumer loans.
Fresh layoffs have been reported in a variety of industries, with the Tennessee portion of the District apparently hardest hit. Aside from recent layoffs in aluminum, rubber, and textile plants, workers in Tennessee have been idled in plants producing aircraft parts, electric motors, and clothing outerwear.
Elsewhere in the District, layoffs have occurred at plants producing asbestos pipe, boats, lighting fixtures, ammunition boxes, and mobile homes. The mobile homes industry is reported to be suffering from overcapacity, and one producer commented that the industry is undergoing a shift in production in favor of modular homes.
A manufacturer in the Mobile, Alabama area has cut production and employment by 40 percent because he has been informed that his natural gas supply will be reduced 25 percent if there is normal winter weather this year.
The General Motors strike is responsible for continuing layoffs in the aluminum industry and for a sharp drop in shipments of coke from Birmingham to Midwest steel mills. The strike was also mentioned by some small Georgia bankers as a reason for weak consumer loan demand.
There have also been reports of reduced investment in plant and equipment expenditures on industrial projects in Tennessee are reportedly off 80 percent from last year. A steel company has postponed plans to construct a plant in southwest Mississippi to produce electric motors because of the slowdown nationally. In addition, the inability to obtain a long-run contract for natural gas was given as a reason for a steelmaker canceling an option to purchase a large tract of land near New Orleans.
A survey of department stores throughout the District indicates year-to-year sales gains of only one to three percent. Most of these retailers are anticipating a slow Christmas season and are accordingly planning modest inventories. Also, they do not foresee an upswing in sales during the first quarter of next year.
A slump in air traffic is a further indication of economic sluggishness. So far this year, Birmingham has realized only about a four percent increase in air passenger volume, compared with a 17 percent increase a year ago. The slump in air traffic has set back airline earnings at a time when Birmingham is negotiating contracts with airlines for municipal airport facilities. This may retard the city's airport expansion program.
Construction activity is mixed. In the Nashville area, new construction is off more than 20 percent so far this year, with no upturn in sight. Residential construction is slow in south Florida, where the volume of new and used home sales is down around 20 percent from last year and softness in luxury apartment rentals is also reported. However, commercial construction in south Florida is reported up about 50 percent this year. Housing construction is at a complete standstill in south central Louisiana and commercial construction is slow. Residential construction in north Alabama is reported vigorous, with mortgage demand strong for homes in the $40,000 to $70,000 bracket and modest in the $25,000 range. Mortgage money for homes below $15,000 is reported to be nearly nonexistent. In the Mobile area, residential construction is reported very active in the extremes of the market—i.e., disadvantaged/elderly and luxury type.
There is some more disquieting news on the inflation front. Utilities in Tennessee have requested higher gas rates, which come on top of the 23 percent average increase in TVA electric rates last month. An aldermanic committee in Atlanta recently approved a water- and sewer-rate increase averaging 135 percent, largely because of water pollution control efforts. In addition, it has been recommended that rates for garbage and trash collection be increased 91 percent in Atlanta. The price of citrus pulp, an ingredient in livestock feed, has jumped to $50.00 a ton from $27.50 a year earlier because of the corn leaf blight.
On the optimistic side, the cast iron pipe industry reports improved profit margins, the economy of central Florida continues to be vigorous, and the paper industry is reported to be undertaking projects shelved earlier this year.