January 2, 1980
Moderate gains in Christmas spending provided welcome support to the District economy during the past month. The slump in housing and automobile sales continued. Loan demand slackened. Consumer delinquencies moved upward. So far, unemployment rates have not risen. The tourist industry was strengthened by the announcement of huge investments in the New Orleans area and Orlando. Orange growers face a reduction in revenue because lower prices are expected to more than offset increased yields. Prices for broilers and hogs have finally risen, improving prospects for producers.
Initial reports for the entire Christmas season indicate retail sales levels, in real terms, commensurate with or slightly better than comparable year-ago figures. A property management contact described real sales at his various malls and shopping centers in southern Louisiana as even with levels established last Christmas. Inflation-adjusted sales for a major Atlanta-based retail firm were better than expected, registering a moderate increase. However, this firm's officials share in the prevailing concern regarding sales for the first quarter of 1980. Its bad checks and credit card delinquencies have worsened. A company spokesman believes his customers have accumulated all the debt they can handle and feels the next few months are crucial because the repayment of indebtedness will almost certainly cause those customers to retrench. Retail inventories have been strictly controlled for many months and, therefore, should not prove excessive unless a severe fallout in sales occurs.
Sales of automobiles contracted appreciably. Notable declines occurred in Baton Rouge, Jacksonville, central Florida, and southern Mississippi. Large and intermediate car sales suffered most. Late-model used auto and compact sales, particularly GM X cars, were generally good. Inventories continue to be pared to a minimum, primarily because of excessive carrying costs. For example, a Ford dealer on the Mississippi coast wants to reduce orders to get his normal 60-day supply down to 30 days. GM dealers there will reduce inventories even further in 1980.
Single-family residential construction was curtailed considerably throughout the District, and a recent sizable drop in building permits is certain to further depress this sector. Building permits in Huntsville, Alabama for single-family and multi-family structures are only one-third and one-eighth of year-ago figures, respectively. Substantial declines in permits were also reported for Tallahassee and large metropolitan areas of Tennessee. A large Florida bank forecasts a 20 percent downturn in new residential units in 1980.
Residential mortgage demand has fallen markedly. An Atlanta Federal Home Loan Bank officer reports most S&Ls are encountering a profit squeeze. For example, an Atlanta S&L experienced a one-point increase in its cost of savings during the past year, while its mortgage yield increased by only 35 basis points.
Loan demand dipped in most parts of the District. A Jacksonville banker attributes a decrease in loan demand to high interest rates and selective screening. High interest rates, the postponement of projects, and lower inventories are responsible for a gradual decline in loan demand for a central Florida contact. Commercial loan demand remains soft generally. Consumer loan demand continues to be reasonably strong in south central Tennessee, even though smaller-sized loans are being granted. A Melbourne, Florida banker notes a continuing increase in personal bankruptcies related to credit cards and personal loans.
Unemployment rates remain at relatively low levels. Nonetheless, layoffs in industries that typically weaken prior to a recession (automobiles and residential building materials) are evident. A substantial number of workers at an Atlanta GM assembly plant were laid off during the last half of December due to excessive inventories. In Mississippi, workers at a GM parts supply factory are on a 4-day workweek. Several hundred Ford glass plant workers in Nashville are on an extended layoff. The slump in housing construction caused a work force reduction at a large Masonite plant in Mississippi.
The pace of tourist sector investment will accelerate markedly by the building of $750 million theme park near New Orleans and a $600 million commercial and tourist complex in Orlando. "New Orleans, Past, Present, and Future" may exceed Disney World in size and employ 7,000 upon completion. Plaza International in Orlando will consist of convention hotels, restaurants, and entertainment and retail facilities to complement a planned Orange County Civic Center. The creation of 11,300 permanent positions is anticipated over a ten-year construction period.
This year's orange crop is estimated to be about 20 percent higher than production for the last two seasons. But, prices have slid 30 percent below the year-ago level, suggesting a sizable shortfall in total revenue. District winter wheat acreage expanded by 50 percent vis-a-vis 9 percent for the nation. Georgia's acreage more than doubled. Shrimpers in Georgia are experiencing their best harvest in 10 years. This year's catch and total revenue may set records.
The outlook for broiler and hog producers, which has been gloomy for months, has improved. Some recovery in broiler prices, combined with stable feed costs in recent weeks, has created renewed optimism. Broiler production has grown moderately after dropping sharply below year-ago levels during November. Hog prices have climbed markedly from their very low mid-November level, and Georgia producers plan a 29-percent rise in pig production for the December-February period.