Beige Book Report: Atlanta
July 1, 1980
The District economy remains in a recessionary state. Retail sales dipped in real terms. Residential construction exhibited no significant improvement; however, real estate sales rose modestly. Bank lending remains weak. Carpet and lumber mills report large production cutbacks, layoffs, and the elimination of excess inventories. Much of the District's early corn crop was lost to dry weather, and hog prices received by producers advanced substantially.
The Cuban "Freedom Flotilla" and the devastating riots in Miami profoundly affected Florida both socially and economically. Over 100,000 freedom-seeking Cuban refugees arrived by boat in Key West for eventual settlement, primarily in the Miami area. Upward pressure on unemployment is certain, as are extraordinary governmental expenditures. Deep-seated frustrations sparked large-scale rioting and burning in Miami's black Liberty City area. Property damage alone exceeded $100 million.
Retail sales in the District remained level and failed to keep pace with inflation. Consumer delinquencies grew slightly. Department store executives tightened control even further over employee hours and inventories to alleviate serious profit squeeze situations. A major Atlanta retailer experienced spotty sales, with increases in soft goods, especially women's wear, offsetting declines in hard goods and home furnishings. Relatively good sales levels were reported for discount stores due to the heightened price-consciousness of consumers. Movie admissions, which historically fare well in recessionary periods, are up. Lawnmower sales, which have previously been strong, dipped, and orders for motorcycles and bicycles softened for the first time in several years.
Automobile sales were stagnant and well below year-ago levels. Although automobile loan rates have been sticky, several dealers felt the well-publicized general decline in interest rates caused a considerable jump in showroom traffic. Import dealers continued to do well at the expense of domestic dealers. For many, stepped-up parts and service receipts blunted the impact of the slump in sales.
Districtwide, residential construction activity continued to be sluggish. One exception is the Atlanta area, where housing permits for early June climbed to 23 percent above year-ago levels. Home sales, meanwhile, showed a moderate gain overall. A southeastern Florida contact was encouraged by sales in June returning to near normal proportions. A Nashville contact experienced a slight increase in sales and a spurt of inquiries. Home sales rose modestly in the smaller cities of east Tennessee and north Georgia. At District savings and loan associations, generally, mortgage commitments are up appreciably and savings inflows have improved sharply.
Weak loan demand still characterizes the District's banking sector, especially commercial and consumer lending. Consequently, many bankers are aggressively seeking new loans. Numerous banking contacts observed a decided shift by savers from 6-month money market certificates to 30-month certificates due to interest rate differentials.
Backlogs of office and other large construction projects in the Atlanta area are down because of previous nonavailability of permanent financing. Occupancy in office buildings, however, has risen to 90 percent and beyond, and pension funds have recently returned to the market but are requiring significant profit participation and seeking short maturities.
In several of the District's major industries, inventories are now down to desired levels, following production curtailments in recent months. Carpet manufacturers, heavily concentrated in northern Georgia, cut production during the last quarter by about 25 to 30 percent. Carpet and Rug Institute, the national trade association, judges inventories to be in line with sales. Unemployment among carpet workers is moderately high.
Lumber inventories at mills were reported at planned levels, but only after production was slashed by at least one-half since QIV:1979 at numerous firms. Sizable layoffs among lumber workers have had a wide impact. Manufacturers of paper products have enjoyed relatively constant production and have experienced no involuntary inventory accumulation.
Dry weather severely damaged much of the early corn crop in the Southeast, but cotton, peanuts, and soybeans were in good condition following a recent rainfall. A sudden upturn in hog prices recently brightened prospects for producers. However, sharply lower prices during previous months were responsible for a 13-percent reduction in farrowings planned for the fall months in Georgia. Sustained losses suffered by broiler producers, due to low broiler prices, indicate a further shrinking in production for the industry.