Beige Book Report: Atlanta
September 12, 1979
District businessmen generally feel that they are in a recession, that it will be mild, and that it will have very little effect on inflation. Alabama directors see the current recession concentrated in middle-income buyers. Luxury goods and discount stores are doing very well, but chain stores in middle-income markets report very sluggish sales and rising delinquencies. Many directors think inflation is here to stay and that counter-recessionary policies to come will only worsen inflation.
District-wide, retail sales gains continued to fall behind inflation. Rebates are succeeding in bolstering sales of larger automobiles. Loan demand is slack and delinquencies are up. Residential housing construction remains stable despite some notable declines. Gains in commercial and industrial construction helped offset residential losses. Employment held firm. Tourism activity recovered from early summer declines. Plentiful rainfall augured well for agriculture throughout the District.
Most contacts reported increases in retail sales not commensurate with inflation. Back-to-school sales were helpful. A few contacts reported considerable softness in big-ticket items such as furniture and appliances. Inventory levels are considered manageable. One contact is even keeping inventories high in anticipation of brisk sales. Rebates on mid-sized and large-sized 1979 models boosted sales after several sluggish months. Demand for compact cars remains intense. Many dealers are reporting very low inventories.
Generally speaking, loan demand was weak. A few contacts, however, reported strong demand. Deposit inflows have moderated, with increased money market certificates offsetting sagging passbook savings. Delinquency problems appear to be on the increase, particularly among middle-income families. Consolidation loans are reported up.
Residential housing construction remains stable, mainly because of strong increases in Florida. New Orleans, Baton Rouge, Nashville, and central Mississippi experienced notable declines. In Nashville, inventories of higher-priced homes are excessive. A Knoxville savings and loan executive reports that mortgage funds are drying up, but his report is not typical. District-wide, mortgage money is generally available, and applicants are being screened very closely.
In the states registering declines in residential construction, commercial and industrial construction gains are compensating. New Orleans, Baton Rouge, Nashville, and the Mississippi Gulf Coast are all experiencing good growth in office buildings, shopping centers, and new plants and expansions. In Florida where residential construction is good, commercial and industrial construction is strong. The International Minerals and Chemical Corporation will spend approximately $450 million on a major expansion of its phosphate rock and chemicals production.
The region's forestry-related sector was strengthened by several recent announcements. Kimberly-Clark, a diversified paper company, will construct a division headquarters and research facilities near Atlanta. Outside the Jacksonville area, a large sawmill for pine dimensional lumber will be built by Owens-Illinois and a large wood chip handling facility by Georgia-Pacific. In the Florida panhandle, the St. Regis Paper Company will expand substantially its paper manufacturing complex and a new company will develop a wood- processing plant to produce fiber pellets for use as fuel.
Employment throughout the District is fairly steady so far, but many contacts believe unemployment will trend upward in the coming months. Additionally, new Comprehensive Employment Training Act regulations that limit CETA employment to 18 months, effective October 1, and heavy federal budget cuts will nudge unemployment even higher at a time of anticipated slow economic activity. For example, more than 1,500 CETA workers in Atlanta are expected to be laid off by the end of the year and 182 are scheduled to lose their jobs in East Baton Rouge Parish.
After appreciable declines for June and July, attendance at many attractions showed reassuring increases in August. Tourists dealt with higher gasoline prices by continuing to visit attractions within a shorter driving range. Campground business remains very weak throughout the District because of a reluctance to travel too far with gas-guzzling recreational vehicles.
Abundant rainfall throughout the District has enhanced yield prospects for crops, particularly soybeans, corn, peanuts, and cotton, and improved pastures. Resultant higher quality pastures helped maintain the good physical condition of cattle herds during the hot summer months. Pork and poultry producers are experiencing a profit squeeze, resulting from declines of approximately 15 percent for pork and 20 percent for broilers from year-ago levels. Hurricane David did not seriously damage most major cropping areas of Florida and Georgia; however, an estimated 10 to 20 percent of Florida's sugarcane crop was lost and, according to early reports, the grapefruit crop along the Coast also incurred appreciable losses.