Beige Book Report: Atlanta
October 10, 1979
Consumers seem increasingly cautious and bargain-conscious but are continuing to buy. Softening is evident in auto sales and residential construction (except in Florida). Expectations within the tourist industry are more upbeat. Florida, in particular, was buoyed by the start of a massive expansion at Disney World. Employment continues to hold firm. Except for poor broiler and hog prospects, agriculture is in good condition.
Hurricane Frederic wreaked $1.5 billion in damages to Florida, Alabama, and Mississippi, equaling the losses in 1969 from Hurricane Camille. Thirty counties were declared federal disaster areas, making them eligible for massive federal assistance. The Alabama State Docks in Mobile were shut down by up to $40 million worth of damages. Two miles of Alabama's Dauphin Island causeway were completely wiped out. In Pascagoula, Ingalls Shipbuilding and the Chevron USA refinery suffered $10 million damage each. The storm hit the Mississippi seafood industry hard, inflicting losses to processing plants and possibly dealing the oyster industry a new setback on top of reef pollution caused by spring floods. Shrimp and crab populations, however, were unaffected. Further Mississippi contacts reported storm damages in excess of $100 million to the timber industry and expect the increased volume resulting from salvage cuts to substantially depress timber prices. Destruction to homes throughout the three-state area was severe and widespread.
No significant downturn in retail sales is yet apparent, but no contacts reported strong sales. Consumers in general were becoming more price and value conscious, and retailers were exercising strict inventory management. Heightened interest in gold, silver, and large diamonds were noticeable developments. An Atlanta jeweler notes that older people are liquidating their jewelry to meet inflation. Auto sales, overall, are sluggish. Rebates and promotions continued to boost sales of mid-size and full-size automobiles, although one Florida dealer suspects the rebates have created a "false prosperity."
Residential construction, except in Florida, has slowed down. Speculative building, even in some parts of Florida, is virtually at a standstill because interest costs make it financially impossible for builders to hold a home for any length of time before it is sold. The consensus in Birmingham was that the single-family market will not improve until the third and fourth quarters of 1980. Savings and loans are still providing mortgages but only to very well-qualified applicants.
Interest rates continued to soar, but loan demand has not, as yet, been significantly affected. Demand for six-month money market certificates was strengthened by record yields. Bankers in several different locations reported worsening delinquencies. Some northern Alabama bankers are having to work harder to collect payments and have also noted a decline in the quality of applicants.
Expectations regarding tourism, except in hurricane devastated areas, for the remainder of the year are positive, with most contacts projecting volume to approximate last year's. Disney World continues to prosper. Groundbreaking for the EPCOT Center, part of the Experimental Prototype Community of Tomorrow, was held recently. The project, also encompassing two theme parks, World Showcase and Future World, totals $500 million in construction costs and, upon completion in three years, should bring 8 to 10 million visitors per year.
Unexpectedly, unemployment remained stable or improved throughout much of the District, partly because employers had been cautious about hiring earlier. However, the vulnerable auto-related industries experienced a slowdown. In Tennessee, for example, tire cord and truck transmission manufacturers reduced employment. In Birmingham, approximately 1,000 employees were laid off at the U. S. Steel facility.
Discounts on steel and aluminum are being offered. The discounts on steel prices reflect a slowdown in the automotive sector. An Atlanta area contact reports no large excess in aluminum inventories as experienced in 1973. One Atlanta paper products manufacturer reports strong growth, together with a recent buildup of inventories because of a slowdown in orders, while two Florida paper manufacturers report no inventory accumulation. No one foresees a significant decline in demand.
Harvesting is under way and increased yields of soybeans, cotton, peanuts, and corn are evident. Abundant rainfall is the primary reason. Hurricane Frederic missed major cropping areas. However, row crops and pecan groves were severely damaged in the relatively narrow path of the storm. Markedly higher feed costs continue to squeeze profits and, in many cases, enlarge losses on broilers and hogs. A northwest Alabama contact reports disastrously low hog prices.