Beige Book Report: Atlanta
August 7, 1979
The gasoline crunch hit hard in only a few parts of the District but adversely affected much of the tourist sector. Now that gasoline supplies are adequate, some recovery in tourism is in prospect. Consumer spending has been soft, and there have been some layoffs in manufacturing. Residential construction continued its shallow decline, except for Florida and Georgia. Mortgage credit remains in good supply. Bank lending is growing at good, but less than boomy, rates, and commercial construction continues at a brisk pace.
Gasoline availability problems, which eased several weeks ago, left a negative imprint on the District's important tourist sector. Florida's Governor stated the gasoline crunch cost the state 20 percent of its normal tourism, the state's number one industry, from mid-June to mid-July. In Georgia, many motel operators with businesses along the major north-south route through the state reported an appreciable drop in occupancy rates compared to last year. Nashville businessmen involved in tourism estimated a decline in business anywhere from 10 to 35 percent. Although long distance driving was down, resort areas along the Georgia coast and within a day's drive from surrounding metropolitan areas received a near-record influx of tourists. Also, Latin American tourists have been coming to Miami in record numbers and staying longer because of actual or perceived inadequate gasoline supplies throughout the rest of the state.
Near-term prospects for tourism have improved. A massive and apparently successful campaign to boost tourism in Florida began in mid- July. Also, many hotel and motel operators in central Tennessee report reservations are already up for August. Thus, sagging tourist trade within the District seems to have bottomed out.
Considerable softness in consumer spending was evident in most sections of the District. However, a notable exception was a real increase in sales at most large shopping malls in the Atlanta area where consumers substituted trips to area shopping malls for out-of- town weekend trips and consolidated several shopping trips into one. Automobile sales were sluggish because of continued slackened demand for mid- and large-sized cars; interest in fuel-efficient compacts remained intense.
Because of sagging sales, over 1,400 workers in the Atlanta area were placed on indefinite layoff, some with long seniority, at the Ford LTD assembly plant. U.S. Steel in Birmingham recently announced a severe cutback and the possibility of closing a plant there.
Inventories appear to be at manageable or even lean levels. Expectations of recession and, therefore, flat or slightly declining real sales in the third and/or fourth quarters of this year induced many retailers to trim stocks well in advance of the downturn.
The single-family residential construction pattern continued unchanged. Florida and Georgia, specifically the Atlanta area, recorded increases in building permits; the other District states experienced declines. Mortgage money remained generally available. Nonetheless, high mortgage rates dampened demand except for the more active areas in Florida and Georgia. And while some potential customers were priced out of the market, inventories of single-family dwellings are nowhere uncomfortably high.
Business and consumer loan demand continued on a stable path, with most District bankers experiencing satisfactory increases. However, a large Georgia bank reported that demand for business and consumer lending has not been particularly strong, as businessmen are delaying future plans because of the recession. Weakness in consumer loan demand resulted from a downturn in automobile loans. Some bankers report an increase in applications for debt consolidation loans, but it is too early to tell whether a trend is developing.
Savings inflows to banks since April have been positive but slight, supported primarily by moderate but stable increases in money market certificates. Two recent financial developments within the District concern the raising of the usury ceiling on mortgages in Louisiana from 10 to 12 percent and the offering of variable rate mortgages by two Florida banks. The two banks offering VRMs report very active interest and substantial additional business from this innovation.
The brightest spot with respect to commercial and industrial investment continues to be Florida. Projects included a five-year, $200-million downtown redevelopment in Jacksonville and new pharmaceutical and paper bag manufacturing facilities and a large convention center and condominium complex in the Tampa Bay area.