Beige Book Report: Atlanta
January 11, 1978
December was a banner month for consumer spending; auto purchases held up better in the Southeast than in the nation. Banks have realized strong gains on both sides of the balance sheet, but at S&Ls, the gap between loans and deposits has widened. Housing demand continues to climb. Rising agricultural prices have brought some relief for the farmers' plight, and the strike has had little impact. Job gains continue despite strikes and layoffs. Businessmen are relatively optimistic about economic conditions in 1978.
By almost all accounts, December retail sales broke all records and a brisk buying pace carried through the week after Christmas. Retailers commonly estimate year-to-year sales gains at 15-20 percent. Two directors commented that luxury items had been moving particularly well in their areas. One retailer who had been concerned about his large inventory now complains that inadequate stocks restrained his sales. Only in the coal-mining areas of northeast Tennessee did sales fail to show a year-to-year advance.
Sales of new domestic-made cars seem to have held about even with last year in the last few weeks of 1977. Dealer inventories have reached "ample" (but below national) levels. Designations of the best-selling models vary too widely for a neat characterization. In Jacksonville, a record number of imports were unloaded last month. Truck sales continue to surge; both Chrysler and Ford recorded all- time peak truck sales in their southeastern zones last month.
Bank deposit inflows have strengthened after a brief slowing; large-denomination CDs have accounted for much of time deposit growth. Exceptionally strong gains in bank lending have been broad-based, inducing some banks to reduce their securities holdings. Stricter adherence to usury laws has reduced bank earnings in Tennessee. Mortgage rates at S&Ls have held a pretty even keel, though lending activity remains heavy. There are indications that sources of funds are tightening in places: Central Florida S&Ls are advertising certificates at maximum rates (atypical in that state), and Atlanta associations are both advertising and offering premiums again.
The pace of residential construction has continued to accelerate through the off-season, still led by single-family homes. Demand for existing homes has mounted. Apartment projects are coming on stream at a quicker but moderate rate as vacancies dwindle and rents climb.
The first round of annual tallies of nonresidential construction outlays shows surprisingly strong (30-75 percent) gains in some of the smaller cities. Planning has progressed to the initial stages of construction on several major industrial projects (representing several hundred million dollars) announced earlier. On the negative side, Offshore Power Systems of Jacksonville ordered a 30-day halt (with possible termination) on $75 million of construction when the State of New Jersey, its only customer, extended the delivery date on its order by three years.
Stronger export demand has lifted prices of farm products, especially grains, improving farm incomes somewhat from badly depressed levels. Recent loan applications suggest that Mississippi farmers have maintained their living standards through a disastrous year, piling up substantial unpaid debts. The effects of the much-publicized farmers' strike have been limited to sporadic interruptions of marketings. Livestock auctions in Georgia and Alabama closed briefly. Picketers at meat-packing plants convinced few truckers to hold their cargoes, but slaughter volume was reduced temporarily. Late December explosions at several grain storage facilities are thought to have been caused by unusual atmospheric conditions, combined with high concentrations of dust, rather than sabotage.
District employment has risen steadily despite the interruptions of strikes. Most of the disputes which have troubled the labor scene for the past few months (including the massive Lockheed strike) have now been resolved. The coal strike, however, has begun to afflict retailers, banks, and small coal producers in northeast Tennessee. The impact of a recent large layoff in central Florida will be more than offset by new jobs provided by industrial expansion; a new CETA grant to Mississippi will furnish almost as many new jobs as will be lost to extensive layoffs by Ingalls Shipyards.
There is no uniform consensus among businessmen or area economists about the prospects for 1978. Few are totally pessimistic, but most express some apprehension about inflation, government regulatory policies, energy developments, and the minimum wage. Tennessee bankers are particularly concerned with the outcome of a March constitutional referendum on the usury ceiling. The majority of business leaders expect the economy to improve at least as rapidly in 1978 as it did in 1977. They generally anticipate better-than-national growth in their own industries or locations, citing such potential stimulants as reviving population growth, continuing housing expansion, rebounding nonresidential investment, and/or increasing tourist inflows.