Beige Book Report: Atlanta
January 14, 1976
Reports from directors, purchasing agents, and other contacts confirm a brightening in the Southeast's economy. At the year-end, department store and auto sales are strong throughout the Sixth District. Tourism is the most vibrant sector. Construction and real estate activity remain depressed, but various manufacturing industries are experiencing greater strength. Developments in the agricultural sector offer hope for continued moderation of price increases.
Consumer spending is leading the recovery. Department store holiday sales have surpassed expectations. Many merchants reported the finest Christmas season in their experience, including such banner years as 1972 and l973, although in some areas sales did not equal 1974's. Inventories of many stores were so depleted by the rapid pace of holiday selling that merchandise for post-Christmas sales was scarce. There were no indications of overstocking and several sources report strong reordering of merchandise. The most successful retailers seemed to be those who used active promotions. The proportion of cash sales was reportedly up from 1974.
Auto dealers likewise reported a sharp increase in sales—the best December in years for certain dealerships—and in some areas inventories were depleted. Aggressive promotion was again mentioned as a key element of success, and a high proportion of cash sales were reported. Several lenders expressed disapproval of the trend toward longer maturities on automobile installment credit contracts.
Tourism remained the most ebullient sector in the Southeast's economy, even exceeding retail sales activity. Record numbers of tourists were reported at Louisiana, Tennessee, and Florida tourist attractions, hotels, and motels. Trailer and camping facilities in southern and central Florida were operating at maximum capacity. In late December, the influx of visitors to Florida caused major traffic congestion as far north as Atlanta. Crowded conditions forced major Florida tourist attractions to close their gates from time to time.
In contrast to tourism, construction and real estate remain depressed, particularly in Florida. The resale of existing single- family residences was the only segment showing significant improvement. New home construction remained in a slump in most areas, and nonresidential construction was generally dormant except for sporadic plant or public sector construction. Scattered reports of gains in residential construction were received, but they were mostly interpreted as evidence of bottoming out. A large overhang of available new residential units persists in Florida. Many major projects remain in financial distress. Some slight reduction of the inventory of houses and condominiums was reported, but the absorption rate is low relative to remaining stock. This is particularly true for condominiums, of which 37,000 units in south Florida remain in stock; 3 percent are sold each month. The vacancy rate is reportedly greatest for expensive units. Various sources indicate that the speculative and second-home market segments have largely evaporated, leaving primary residences as the only source of demand. Experienced construction laborers are migrating from Florida to Louisiana in response to job opportunities.
Demand, prices, and output in various manufacturing industries have improved. A major aluminum producer is maintaining a recent price increase and expects increased production. Demand for forest products, including poles, paper, boxes and lumber, continues to improve. Contrary to the usual seasonal pattern, lumber demand increased steadily from October through December. Increased prices for paper products are being maintained successfully. Wholesale prices for spring and summer apparel merchandise are steady but are expected to rise this fall. Demand is reportedly good for a manufacturer of pleasure boats and a maker of appliance timers. A major railroad company reports the return to service of railroad cars and engines withdrawn to storage in the first half of 1975. A large steel manufacturer reports some growth in orders but expects no sizable increases until late in the year.
Georgia purchasing agents, responding to a survey in November and December, indicate expectations consistent with a continuing slow economic recovery. Higher prices are unanimously anticipated. A large and growing proportion expects no change in delivery times on orders. A large majority plans to keep finished good inventories unchanged, while the proportions expecting larger, the same, or smaller raw material inventories are about equal. The number of respondents expecting lower production has steadily declined, while the proportion looking forward to higher sales and profits has risen. Employment is reported to be essentially stable, while indications of constant or declining order backlogs are evenly balanced. Delivery lead times are evenly divided between thirty days and sixty days.
In the agricultural sector, lower feed costs offer some hope for improved conditions to hard-pressed cattle producers, so that the size of the cattle herd should cease declining. Hog production is described as "the only bright spot in agriculture". Larger supplies of inputs, including fertilizer, fuel, pesticides, and agricultural equipment, should cause a further slackening of price increases. However, the higher minimum wage will exert some upward cost pressure. Food processing and retailing industries in recent years have been unable to offset rising costs of fuel, labor, machinery, and packaging through productivity increases; in the 1950's and early 1960's, substantial productivity gains helped to limit price increases. One director notes that the average price per ton of sugar cane declined from $47 in 1974 to $15 in 1975 but that this differential has not been felt by the consumer.