Beige Book Report: Atlanta
December 15, 1976
Further strengthening occurred in the Southeast. Despite concern about natural gas supplies, a number of steps are being taken to maintain adequate supplies of energy. Consumer spending has increased, although rural areas are feeling the pinch of energy costs. Inventories may be inadequate if vigorous holiday sales continue. Auto sales are spotty, with some signs of price resistance to new models. The winter tourist season has been boosted by cold weather, investments in convention and tourist facilities are increasing, along with major plant investments or expansions in paper, rubber, and transportation. In contrast to this cheerful picture, payment problems and the termination of some major ventures echo the effects of the recession. Savings and loan associations are enjoying rapid growth in the Southeast.
Energy resources remain a key influence on economic activity. Concern continues in parts of Tennessee that industrial use of natural gas will be curtailed, causing unemployment. This outcome appears likely in some areas if the abnormally cold winter persists. Looking toward the future, an immediate decision by the Federal government is expected on construction of the Louisiana Offshore Oil Port, a facility to receive oil shipments from supertankers. Several nuclear power plants are under construction in the Southeast, including one north of Baton Rouge, Louisiana, and another in Southeastern Florida. Construction of a third plant on the Southeast Florida coast has been halted by environmental interest groups. Seven to eight hundred construction workers have been laid off. A highly promising new oil and gas strike off the Louisiana coast illustrates the possibility of further development of offshore oil resources. Extraction of methane from salt water in deep-drilled oil wells is being investigated as a potential source of additional natural gas supplies.
Rising energy prices in connection with abnormally cold weather are reducing consumption outlays in rural areas. Rural residents who depend on liquefied petroleum gas for heat have recently experienced a doubling of their fuel costs in some areas. A brighter consumer spending picture emerges elsewhere in the District. Most department stores report enlarged post-Thanksgiving sales volume, although some expect to do no better than last year. Last month's suggestion of a bifurcated consumer market has been confirmed by current reports that strength is concentrated in the more luxurious lines of boats, automobiles, and department store goods. Inventories of retailers and wholesalers are unusually low. If the present sales growth persists, sales volume will be lost due to unavailability of goods. Especially strong sales are found in eastern Tennessee, which benefits from the high incomes of coal miners in neighboring states, and in central and south Florida, where tourist traffic has been boosted by abnormally cold weather elsewhere in the country.
Sales of automobiles are spotty. Buyers rejected the smaller cars but are now responding to the rebate offers in some areas. Large models, especially luxury cars, are enjoying the strongest sales. However, several areas report disappointing sales in November for dealers unaffected by the recent strike. There are also some reports of resistance to the higher prices on 1977 models.
Tourism promises to remain the District economy's bright spot. The winter season in Miami and Fort Lauderdale is off to a fine start as a result of severe weather elsewhere. Tourism continues to lead central Florida's recovery. New Orleans's restaurant population is growing rapidly; new hotels and motels are adding to the city's dining facilities, established hotels are renovating, and several new restaurants are also being built. A new hotel and convention center is under construction at Opryland in Nashville. The circus world theme park in central Florida will double the present size of its operation during 1977. International flights have been approved for the Orlando Airport.
Some additional strength is evident in capital spending. In Tennessee, announced spending for new and expanded plants through the end of September exceeded the 1975 total. Industrial power usage reported by TVA has shown an upward trend and is close to the pre-recession level. In Georgia, new capital investment announcements through October are two-thirds greater than in the first ten months of 1975.
Demand for paper products remains weak, with several mills taking down time. Backlogs of orders have dropped. Still, a bleached kraft market paper plant, with an investment of $286 million, is being built in Alabama.
The Goodyear facility in Gadsden, Alabama, will undergo a major expansion, becoming the largest tire plant in the world. Employment will expand by 400. Surface transportation facilities are also rapidly expanding. A large trucking company is building freight terminals in three Florida cities for service to cities in the far West. In Atlanta, a long delayed $50-million super truckstop will be built on a 280-acre site.
Less favorable developments include indications of slowness in payments to milk producers in Florida. In Atlanta, an innovative high-rise amusement park located in a new downtown office-hotel-retail-condominium complex has ceased operations; a six-month trial period failed to achieve profitability. a major hotel chain has decided to withdraw from managing a luxury hotel in another multi-use complex located near the downtown area.
Strong savings and loan activity is reported throughout the District. Healthy gains in savings inflows and in lending activity are widely reported. In Florida, over a five-year period, deposits at savings and loan associations have almost tripled; they have risen during this period from about one-half the level of total commercial bank deposits to approximately equal bank deposits.