Beige Book Report: Atlanta
April 12, 1977
Warmer weather has revitalized major parts of the southeastern
economy.
A special survey elicited indications of pervasive,
tenacious price increases. The construction industry continues to
benefit from strong home construction, while apartment building
lags. Financial developments largely reflect the trends in
construction. Retail sales are vigorous, in general, with particular
strength evidenced by auto sales. Tourist traffic and expenditures
have revived. Trends in transportation, inventories, and new orders
suggest increasing economic vitality. Federal Government review of
water resources projects may pose a threat to economic prospects in
several parts of the Southeast.
Responses to a special survey of directors suggest that persistent, widespread price increases are continuing, partly in response to adverse weather. In Florida, in addition to the price increases resulting from the reduced juice yield of citrus fruit, the heavy demand for harvesting labor has boosted labor costs 10 to 20 percent. Vegetable growers in South Florida are now shipping their first replanted crops of beans, yellow squash, and zucchini, but tomatoes will remain in short supply until late April. Growers in central Florida report ideal conditions in recent weeks, promising high yields.
Manufacturers of products which use petroleum-based raw materials, such as fiberglass boats and tires, anticipate price increases stemming from the forthcoming energy program. Energy-dependent producers, such as transportation, utility, and lumber companies are requesting or posting price hikes. A large aluminum producer notes that recent aluminum price increases are "sticking." They expect additional price boosts resulting from power cutbacks in the northwestern U. S. and a lack of sufficient capacity in other regions to offset the production losses.
Food manufacturers are presently increasing their list prices but are maintaining transaction prices by offering discounts. No immediate increases in wholesale food prices are anticipated. However, the price of beef has been held down by cold weather. Feed supplies were cut sharply by the adverse weather, which maintained the supply of cattle for slaughter. The resulting herd depletion may eventually result in a sharper upturn in prices.
Construction executives note that home prices are rising in step with materials prices and that increasing costs of construction will gradually be reflected in prices of industrial commodities and in apartment rentals. Observers also note a shift in a number of industries from fixed price to flexible price contracts containing pass through clauses.
Directors also indicate that single-family construction continues to dominate the District's construction recovery. In most areas, large increases from year-ago levels in home construction and sales are reported. In some areas, sales have doubled. Areas where sales have not increased sharply are those where sales were already strong. Multifamily residential unit sales continue to gain, reducing the stock of unsold units; in some cases this decrease is quite rapid. The foundation appears to be developing for a slow recovery in this depressed sector.
Apartment construction has increased in Alabama. In other District states, high costs of construction and financing, as well as the conversion of condominium units to rentals in some areas, have limited the construction of new apartment units.
Financial developments primarily reflect construction activity trends. Savings and loan associations have felt increased demand for construction loans in some, but not all, areas. Despite decreasing vacancy rates, lenders are reportedly reluctant to lend for apartment construction as a result of previous adverse experiences. However, inquiries about financing of new condominium projects are reported. These are mostly small projects in the mid- to upper-price range. Stringent terms of lending and financial standards are reportedly being applied.
Retail sales are improving, according to most reports, although some retailers found March sales disappointing in view of an early Easter, which was expected to boost sales. Concern is voiced about the inhibiting effects of increased utility bills, the cost impact of the minimum wage increase, and the response by consumers to higher prices on fall merchandise. Inventories remain in a satisfactory range.
Auto sales are very strong; the strength continues to be centered in the large- and intermediate-sized models. Dealers are still experiencing difficulty in obtaining deliveries of the models most in demand.
Tourist traffic has rebounded strongly in the Southeast, following the dampening effect of severely cold weather. Hotel and motel occupancy has risen markedly; highway traffic and air passenger arrivals have increased sharply. In Florida, tourist attractions and beaches are packed. Retailers are enjoying increased sales. Employment in service businesses has grown. However, one director notes doubts concerning the strength of tourism by sources within the industry, based on a sustained weakness in business prior to the cold weather period and the absence in recent weeks of an appreciable upsurge.
General business developments include an improved, although erratic, pattern of truck rental and leasing business in Florida and Alabama. Strong rental business is said to indicate that industrial shippers are moving large quantities of goods. A Louisiana trucking executive cites recent contacts with his accounts that indicate a general increase in the volume of their business. In Florida, an employment increase is noted in business support services, including janitorial, engineering, and computer services.
Appliance manufacturers are reportedly building inventories to meet an anticipated expansion in demand. Some retailers report plans to increase their inventories, while the improved retail sales picture in Florida is attributed, in part, to better selections of merchandise resulting from increased stocks.
An office and home furniture manufacturing division of a national firm reports a recent significant increase in orders. Heavy domestic and international demand for phosphate has caused congestion at the Port of Tampa docks.
Georgia mobile home plants should benefit from recently enacted legislation permitting 14 foot wide mobile homes to be transported on state highways. Employment and the number of firms in the industry have fallen sharply in recent years. Restrictions on transportation were viewed as a major impediment by the industry.
The major development affecting employment is the impending layoff of as many as 15,600 employees of a major shipbuilder located in Mississippi. Fortunately, some of these workers may be hired by New Orleans shipyards which have a substantial backlog.
Recent scrutiny of Federal water resource projects has raised questions concerning the continuation of several major projects in the Southeast, including the Richard Russell Dam on the Savannah River, the Tennessee-Tombigbee Waterway in Alabama and Tennessee, and the Red River navigation project in Louisiana. Each project is regarded as significantly affecting current and prospective economic development in its surrounding area.