Beige Book Report: Atlanta
September 9, 1980
Guarded optimism characterizes most reports throughout the District. There is growing sentiment that the recession has bottomed out. While consumer spending continues to be restrained, confidence seems to be returning. Inventories are in line, with few exceptions. Laid-off workers are being recalled in some industries. Several large capital investment projects are recently under way. Alabama, with its large share of heavy industry, has been hardest hit—unemployment has reached nearly 11 percent. The unrelenting heat wave exacted a heavy toll from livestock and crop production.
Consumer Spending and Inventories
Stronger-than-expected back-to-school soft goods purchases have been encouraging in an otherwise
sluggish retail sales picture. Auto supply sales, primarily tires,
have contracted substantially. Part of the downturn is attributed to
fewer and shorter vacation trips this summer. Home furnishings and
appliance sales were off; however, paint and other household
improvement items have been selling briskly. One contact noted an
increase in cash sales as credit usage declined; another expressed
concern over the spate of bankruptcy filings under the more lenient
code.
New auto sales have improved in most areas, and used car activity has picked up in parts of the District. There is greater optimism among dealers than earlier in the summer. Consumers are exhibiting an acute awareness of prevailing rates for installment loans—they are shopping for the cheapest money. There is a lot of potential buyer interest in the new introductions by Ford and Chrysler due out this fall. Many new car dealers report lean inventories in preparation for the new model year.
Inventories have been closely monitored, and most contacts note no appreciable buildup. Merchants are buying closer to the time of a sale, as heavily promoted, sale-priced merchandise is turning over quickly.
Financial and Construction
The dramatic downward movement of
interest rates in early summer had rekindled demand for mortgage
loans. Residential contracts surged to the year's highest level in
late summer. However, the recent upturn in rates has slowed
applications at most savings and loans appreciably. Lenders in
Atlanta have raised their rates by a full percentage point. The
range is now 12 1/2 to 13 1/2 percent.
While some commercial banks report soft consumer loan demand, the District's large banks posted good gains in real estate and installment loans. Continued funding for existing projects characterizes commercial lending activity. With the opening of the sixteenth foreign agency branch in Miami and more on the way, international banking is maintaining a rapid growth rate in south Florida.
Employment and Industry
Although employment rolls were trending
downward for some sectors in the District, there have been some
positive developments regarding jobs lately. U. S. Steel announced
the recall of 700 workers in Alabama, although more than 4,000 other
employees remain laid off. Georgia-Pacific Corporation put the last
of its 17 southern pine plywood plants back into operation after
shutdowns because of declining home building activity. Firestone has
recalled 430 laid-off workers in a Georgia tire plant, and in
Alabama, Ford's aluminum casting plant recalled about 200 workers.
Alabama's unemployment situation, the worst in the District, has
been aggravated by strikes and unrest, particularly in Mobile.
Tourism has fared reasonably well this summer. The percentage of foreign visitors continues to increase. One central Florida tourist attraction reported that 27 percent of its current visitors are international. The boom in Latin American visitors to the Miami area shows no letup. While the domestic tourist market has been off significantly, the slack has been taken up by the international tourist. Southwest Florida, which is more heavily dependent on automobile arrivals, has been lagging behind last year. Visitors to Opryland in Nashville are down about 7 percent, mostly due to a decline in out-of-region travelers. The convention trade seems to be relatively recession proof. One contact noted that visitors are responding to the recession by reducing the length of their stay and spending less, but they have not stopped coming.
High-technology firms are not feeling the adverse effects of recession to the same extent as other industries. Scientific- Atlanta, for example, offers productivity-enhancing products, such as communication devices and, as a result, continues to receive orders when capital spending is down.
Business Fixed Investment
Several important large projects have
been announced. The A. E. Staley Company, makers of Karo corn syrup,
plans to build a $200-million corn processing plant in eastern
Tennessee. For the first six months of 1980, Tennessee had a record
$346 million in manufacturing investment. Chevron's $1-billion
refinery improvement project in Pascagoula will employ about 3,000
workers. It is the largest single investment in any economic
enterprise in the State of Mississippi. Western Electric will
construct a $500-million electronics manufacturing facility in
central Florida. The plant will have initial employment of more than
1,900 and will represent the largest new capital investment in
manufacturing in the state.
Agriculture
Income prospects for farmers in the District are dim
due to ravages of drought and heat. Corn and soybean production are
off by 40 and 20 percent, respectively. Livestock weight gains have
been curtailed by the heat. Pasture and forage conditions have
deteriorated, forcing premature marketings.