Beige Book Report: Atlanta
January 28, 1981
Business activity has been generally mixed in the District recently. Retail sales exceeded expectations, but auto sales were off considerably. High mortgage rates continued to restrain home building. Factory employment and hours worked picked up, although areas of weakness are still evident. Florida's food crops were heavily damaged by a cold snap.
Consumer Spending and Inventories
A last minute holiday buying surge, coupled with strong post-
Christmas sales, put many retailers well over sales projections.
Sales at one large retail chain were reported as superb, and a
spokesman for a discount operation said recent sales have "come on
strong." Encouraged by widespread markdowns and promotions, shoppers
turned out in record numbers. Sales of home entertainment items were
up sharply. Consumers were taking more time to shop—looking for
quality. They were also reluctant to incur new debt: charge sales
were down and cash purchases rose notably.
Heavy promotions have not been successful in reviving new car sales as yet. Most dealers report sales off substantially from last year. High floor plan interest costs are hurting many distributors. Dealers argue that by being forced to keep a slim inventory, they are losing potential buyers. Despite the current gloom, many dealers believe better times are not too far off.
Financial and Construction
New home sales were nearly at a standstill throughout the District
due to the high level of mortgage interest rates. Even the "hot"
condominium market of south Florida has slowed. Speculative building
has about ceased. A large Atlanta home builder, whose profits have
dropped by a fourth, announced plans to reduce his operations
substantially. Many home builders are now seeking remodeling
contracts, and others are trying to enter the more active commercial
market. There is concern that a housing shortage will develop
because builders are not building and potential demand for homes is
still growing. Home price increases are expected to persist because
of rising construction costs.
Mortgage applications at savings and loans have slowed to a trickle. Lenders are struggling to devise ways to help families buy houses. One popular technique is for the lender to offer discount rates to buyers of homes on which the lender holds the construction loan.
Commercial construction was mixed. Many companies were delaying new projects until interest rates come down. The number of nonresidential contracts weakened in late 1980.
Employment and Industry
Factory employment and hours worked rose moderately in the District.
Area plywood plants are approaching full production. Our directors
noted heavy exports of wood and pulp from the Jacksonville, Florida
port and strong exports of lumber through Savannah. Employment gains
in the expanding south Florida electronics industry more than offset
employment losses by several industrial groups there. In Louisiana,
rapidly increasing oil and gas activity is attracting smaller
service industries, diversifying the area economy. The outlook for
potential oil and gas drilling in southeast Mississippi was
characterized as excellent. Permits for "wildcat" wells have
increased 20 percent over last year. Textile companies in Alabama
are spending more heavily on expansion and improvements.
On a less favorable note, General Motors has closed its Lakewood, Georgia plant for a two-week period to trim subcompact inventories. The farm equipment business in Georgia and Mississippi is fighting for survival. Inventories have been allowed to dwindle. Farmers have little, or no money to invest because of a combination of drought- caused losses and high interest rates for conventional funds.
The tourist industry is moving at a record-breaking pace. Hotels in central and south Florida reported near-capacity crowds during the holidays. Disney World had to close its gates early due to overcrowding. Miami-based cruise businesses were thriving. The Sugar Bowl and the Super Bowl kept tourist business near capacity in New Orleans, and the Mardi Gras will keep activity strong there at least through mid-February.
Agriculture
A bitter cold spell in early January devastated portions of
Florida's food crops. Officials estimated orange crop losses at 18
percent, but heavy stocks of orange juice concentrate from the
previous crop are expected to limit the rise in retail prices. The
state's vegetable crops were damaged also. Sharp price increases for
tender vegetables (tomatoes, sweet corn, and squash) are a virtual
certainty.
The continuation of unusually dry weather in the Southeast is restricting yield projections from the Districts s winter wheat crop. Planted acreage was expanded by 60 percent in the fall in response to bright income prospects from anticipated normal yields.