While business activity is on the upsurge in most parts of the District, inflation continues to worry most area businessmen. One Tennessee director described the general economic outlook as one of "frightened optimism." Agriculture, banking, and residential construction are areas most severely affected by today's inflation. With the continued rise in material costs, recent large wage settlements, and an expected drop in agricultural output next year, little letup in inflation is anticipated. Tourist activity continues to rebound in most parts of the District. Retail sales are showing some strength, and announcements of new industrial plants continue brisk.

The growing concern over inflation was again evident in reports from businessmen and directors from all parts of the District. The farmer seems to be most directly affected by today's inflation. The beef cattle industry is reported as "sick." At the same time feed prices are high, cattle prices have dropped substantially. One large Tennessee farmer reports a year and one-half supply of feeder calves currently on pasture, which may have to be marketed if pastures dry up. Alabama's and Georgia's poultry industries are also facing price-costs squeezes. Some 30,000 baby turkeys were reportedly slaughtered in Georgia because the cost of raising them is much higher than current selling prices. The net impact of this cost-price squeeze will most likely be less meat output and higher prices in the future.

District banks are feeling the impact of tight money, skyrocketing interest rates, and inflation. Though deposit growth is lagging, loan demand continues strong. A Tennessee director reports that consumer and commercial loans are still on the increase. Tennessee municipalities are now turning to commercial banks and adding to loan demand because they cannot market municipal bonds at statutory interest rates. Mobile home loans are beginning to pick up. Tennessee's 10 percent interest rate ceiling on bank loans is also adding to strength in loans from other borrowers. One Alabama bank representative thought that the Federal Reserve Board should force banks to screen credits and curtail lending. Businessmen are apparently becoming apprehensive over the rumors that banks are heavily loaned with little or no liquidity. An Alabama director notes that the president of a large corporation became so concerned that he had their funds scattered among various banks. Another businessman asked this director to recommend banks in which not to carry funds. Reports from Alabama and Tennessee indicate that delinquency rates on business loans are high.

Residential construction remains sluggish in all parts of the District. Savings and loans in Georgia have experienced a sharp decline in inflows of both savings and mortgage loans.

Retail sales seem to be improving and are now giving some strength to the District's economy. Reports from Jacksonville and Palm Beach, Florida, as well as from areas of Tennessee, indicate strong sales, particularly in appliances. A Tennessee director notes that credit cards are being used to their fullest. He believes that the inflation psychology of buying today to beat tomorrow's price increases has really caught hold. Recreation vehicles sales are reportedly improving in Florida and Tennessee.

Tourist activity, as reported earlier, is on the upswing. South Florida's tourist trade is up, with hotel and motel occupancy rates climbing. In Miami Beach, the occupancy rate in April was 71 percent. Tourism is doing well in New Orleans; most guests appear to be arriving by air. There has been a sharp upturn in tourist business in all areas of Tennessee. Smoky Mountain National Park has begun to attract an increasing number of visitors.

Labor markets remain generally strong, despite some rise in unemployment related to energy problems. Although the worst of these problems seems to be over, a large textile manufacturer is closing two plants-one in Alabama and one in Tennessee. Approximately 1,300 workers will lose their jobs from these closings. An increase in strike activity is also temporarily idling workers. Several strikes in the construction trades, particularly in Florida and Louisiana, are now in progress. Workers in Atlanta area auto-assembly plants have been idled by strikes in parts plants outside the District.

Representatives of a large Alabama materials company indicate that their plant and equipment investment is running 15 to 20 percent behind schedule this year, largely because of delivery problems with capital goods. They are having particular problems with rail car deliveries. The high level of interest rates is not influencing their capital spending or inventory plans. But compensating balance requirements on unused commitments have forced them to hold their bank lines to a minimum. The availability of petroleum feedstocks continues to be a source of concern for this company.

Capital spending plans for new or expanded plants were again heavy. The most significant announcement was a $2.7 billion uranium enrichment plant to be built on the Chattahoochee River near Dothan, Alabama. It is the largest single industrial development ever planned for Alabama. Seven thousand people will be employed in its construction, and when completed in 1983 one thousand four hundred people are expected to be employed. A Japanese spinning company will open in October in Columbus, Georgia; the $2.5 million plant will employ about 90 persons. Industrial expansion and new plants are doing well in Tennessee. Twelve new plants were built in the first quarter of this year and 19 expansions occurred. A number of new plants have been announced in Louisiana along the Mississippi and Red Rivers.