Beige Book Report: Atlanta
May 12, 1976
Economic activity in the Southeast advanced again in April. Capital investment plans advanced strongly in parts of the District. Tourist trade and sales of larger automobiles again reflected the vigor of consumer spending. A survey of Georgia purchasing agents revealed an accelerating pace of business, tighter supplies of raw materials, inventory building, and increasing costs. Shortages have appeared in some types of goods, and price increases have become more noticeable. In agriculture, gains in planting due to dry conditions were offset by cold weather damage. Decreases in rice acreage have resulted from low prices and oversupplies, while cattle prices have risen.
Capital investment is on the increase in the Southeast. In Tennessee, Directors are optimistic about industrial development, on the basis of numerous plant announcements during the first quarter of 1976. Alabama accounts for the great majority of recently announced capital investment projects in the region, including a $3.75-billion uranium enrichment facility, as well as two large pulp and paper projects totaling $500 million. In Louisiana, a $200-million electrical utility plant investment has been postponed because the company's projections indicated inability to finance the cost of the project. A sharp upturn has occurred in inquiries concerning industrial location in the central Florida area, indicating a potential for renewed growth in the state which has suffered most severely from declines in construction activity.
Strong tourist trade continues in the Southeast. In Florida, Cypress Gardens reports record attendance for the quarter ending April 30, the sixth consecutive quarter in which attendance set a record. Tennessee Directors indicate continuing growth in attendance at Opryland in Nashville as well as strong gains in attendance at the Great Smoky Mountains National Park. Tourism is also booming in the Gulf Coast area of Mississippi. The size of groups sent to conventions is rising after falling noticeably during the recession. Another trend is the combination of business and vacation travel.
A vignette reported by a Director from Louisiana epitomizes the condition of the automobile market in the Southeast. The local Volkswagen dealership has closed, while the Cadillac dealer expects demand to exceed the supply of cars available.
A survey of purchasing agents in Georgia reveals continued strengthening and tightening in the region' s economy. The proportion reporting larger inventories of both raw materials and finished goods has risen sharply over the last three months. Sales and production increases have become the rule rather than the exception over the same period. After some acceleration in March, April data show a renewed slowing of average delivery times. Price rises are reported by 80 percent of the sample, up from 70 percent in the two previous months.
Few shortages are reported, although several areas are potentially troublesome. Certain kinds of home furnishings are in tight supply because previous suppliers are out of business. The same tendency is noted for lumber mills. Retailers are concerned about possible fabric shortages and are considering inventory building, although they are currently keeping stocks in line. Fabric manufacturers are producing only for orders, and their delivery lead times are lengthening except for polyester knit yarn.
Price increases are beginning for several types of merchandise, including children's apparel and upholstered furniture. A department store expects prices on its fall lines to rise by 6 percent. A clothing manufacturer expects the overhang of polyester fibers to depress prices further but sees energy and labor cost increases raising garment prices slightly. An electronics manufacturer expects lower materials prices due to technological changes to offset higher labor costs, resulting in level or declining prices.
In southeastern agricultural industries, low rainfall in April has advanced planting ahead of schedule, but dry and cold conditions have retarded seed germination and plant development. Replanting of substantial portions of the cotton crop is necessary in Tennessee and Mississippi. Shortages of quality planting seed in some areas, as well as the lateness of the replanted crop, may retard yields. Weak export demand for rice has caused huge stock accumulations. Prices have fallen nearly 50 percent from the year-ago level, and growers are reducing planted acreages. Price increases for beef cattle have brightened prospects for a long-awaited return to profits for feeder calf producers. This development should arrest the liquidation of cattle herds and, thereby, remove the depressing effect of herd reduction on beef prices. Loans at banks in agricultural areas have increased an average of 9 percent above year-ago levels.