Beige Book Report: Atlanta
May 14, 1980
District economic conditions were decidedly recessionary. Consumers retrenched, and real sales for merchants contracted. Automobile dealers continued to face reductions in unit sales. Residential construction and real estate sales crept along at a snail's pace. Although nonresidential construction was vigorous in some areas, many developers are postponing construction starts until interest rates recede. Layoffs advanced sharply at automotive and building materials establishments. A considerable rise in personal and business bankruptcies occurred.
The normal spurt in spring sales failed to materialize for most retailers. Excluding automobiles, reports of shrinking retail sales volumes were typical and represented activity in nearly all parts of the District. Appreciable reductions in restaurant traffic and credit card purchases were frequently mentioned. Many retailers observed a pickup in repayment rates for charge accounts. After a 25-percent decline in credit report requests, a credit bureau director believes consumers are in a state of shock and are now sitting on the sidelines.
Automobile dealers struggled with the falloff in sales. Unit sales were below March figures and sharply below year-ago levels. Numerous contacts believe potential customers are waiting for automobile loan rates to descend, and, until then, an upturn in sales is not expected. Inventories remained at lowest possible levels. The most striking comment came from an Alabama director who said 21 auto dealers in the state closed their doors during April.
The residential real estate sector remained in the doldrums. Housing starts were at very low levels across the District, even in Florida, and ubiquitous drops in residential building permits did not augur well for the future. Also, home sales slid drastically in southeastern Florida and were off significantly in Birmingham. In a small northeastern Tennessee city, the inventory of unsold houses was at its highest level in many years.
Nonresidential construction activity and plans were still fairly brisk. Numerous announcements regarding hotel, office, and/or retailing complexes were made; however, most developers were expected to postpone the commencement of construction until relatively favorable financing terms can be arranged. The announcements included a large hotel, office, and retail shopping complex intended to revitalize downtown Mobile, two substantial complexes in New Orleans, and one in Tampa. Also, six large-scale projects, including a 50-story World Trade Center, were in progress or are planned for Miami. The projects in the planning stages will be delayed until QIV:1980 or QI:1981 due to the lower interest rates anticipated at that time. Jacksonville and Baton Rouge reported good nonresidential construction activity. On the other hand, commercial construction was judged to be at a low ebb in Birmingham and in Tennessee.
Layoffs dealt a resounding blow to automotive and building materials firms throughout the District. The shortfall in auto sales caused the indefinite layoff of nearly 350 workers at two Mississippi Packard Electric facilities where automotive wiring harnesses are assembled, 200 employees at GM's Saginaw Steering Gear Division in Decatur, Alabama, and about 750 workers at the Nashville Ford Glass Plant. Also, cutbacks at tire manufacturing firms in Alabama, Georgia, and Tennessee were abundant.
Work force reductions in construction-related industries peppered the District. ITT-Rayonier laid off about 90 employees at a lumber mill near Augusta, Georgia, and almost 200 combined at two Florida lumber mills. St. Regis Paper Company curtailed operations at three lumber mills in Georgia and one in Florida. Weyerhaeuser shut down a lumber mill in central Alabama, placing 150 workers on unemployment. Georgia-Pacific closed indefinitely four plywood mills in the District—one in Alabama, two in Georgia, and one in Louisiana. The construction downturn also caused the laying off of 700 workers at a central Alabama foundry due to a reduction in pipe orders. An Augusta, Georgia, brick manufacturing concern closed one of six plants, displacing about 100 workers.
Several contacts commented on a surge in bankruptcies. A southern Alabama contact, who predicts a disaster in the consumer borrowing field, reported an accelerating rate of bankruptcies in his area. In one central Alabama city, personal bankruptcies jumped from March to April, and in a northeastern Tennessee city business and personal bankruptcies advanced markedly over year-ago levels. Business loan demand was very soft in central Alabama despite prime rate reductions. In central Florida, a banker reported sagging loan demand in all sectors. Consumer loans were down for a Miami bank and showed no growth at a large Atlanta bank.
The District's agricultural sector was burdened with widespread uncertainty created by high interest rates, escalated production costs, and an unstable, mostly declining, price structure for farm products. Many encountered a credit crunch and will have a difficult time breaking even. Hog prices, which have fallen for many months, reached an eight-year low and, consequently, have depressed prices of broilers, a close substitute for pork in consumers' diets. Numerous hog producers are considering leaving the business. Cotton plantings grew by almost 12 percent due to anticipated higher prices, 30 percent above year-ago levels. Recent periods of dry weather encouraged the rapid planting of various crops.