Beige Book Report: Atlanta
June 30, 1981
Economic activity in the Sixth District remains mixed. Indicators continue to send out diverse signals as they have since April. Consumer retail spending has improved, but auto sales remain depressed. Residential builders continue to be plagued with high interest rates. Commercial construction appears strong, with numerous large projects underway. Inflation has moderated somewhat recently but is still in the double-digit area. The prospects for agriculture have improved due to recent rainfall that has brought some relief to the Southeast.
Consumer Spending and Inventories
Retail sales have been holding
their own. A few merchants, who directors characterize as innovative
and particularly aggressive, are doing better than expected. Demand
has been strong for seasonal fashions and home furnishings. Credit
sales have picked up recently-a pattern that one retailer
interpreted as a display of consumer confidence in the economy.
Inventories continue to be closely monitored. Businessmen are active
in development of mechanized information systems where point-of-sale
terminals are tied directly to the computer to facilitate the
maintenance of proper inventory levels.
Used car sales continue to be the mainstay of new car dealerships as a result of high interest rates. Dealers say many people are looking and comparing but not buying. Chevrolet and Pontiac dealers complain about the unavailability of J-cars. Auto dealers seemed pessimistic and, as a group, do not expect to see their position improving significantly in the near-term.
Inflation evidently is slowing in the Deep South as in the rest of the country. From May 1980 to May 1981, the all-item consumer price index for Miami rose 10.6%. While this inflation is still unacceptably high, it represents a marked improvement over previous months. This same index had risen 14.8% from March 1980 to March 1981 and 13.2% from January 1980 to January 1981. Although transportation costs were primarily responsible for the slowing, housing costs rose by much less than in previous periods.
Financial and Construction
Housing starts slowed to a trickle in
May and early June following two months of increasing activity. The
spring surge in building permits also subsided. In Atlanta, permits
for single-family houses fell by 34% from April. With soaring
interest rates, prospective buyers are unable to qualify for
financing-even with an ever-lengthening menu of options, such as
buydowns, wraparounds, and renegotiable mortgages. Savings and loans
are being crippled as the cost of funds is exceeding their loan
portfolio income. The average price for a single-family home reached
$93,000 in south Florida recently. High home prices and condominium
conversions are putting pressure on rental units. Demand for low-
cost rentals is outstripping supply in most areas of the District.
Commercial construction appears strong. Contracts at military installations have boosted construction in central Louisiana. In south Florida, foreign investors continue to buy up properties, and in Tennessee, much construction activity has been generated by preparations for the World's Fair.
Employment and Industry
The employment situation has shown moderate
improvement. Expansion of military weapon systems has added to
employment rolls; still, youth unemployment remains high. High
school students have staged two marches in Atlanta to protest lack
of summer jobs.
Port tonnage is up over last year throughout the District with the exception of the Port of Mobile, where the United Mine Workers strike curtailed coal exports. The Port of Miami continues to expand into one of the world's most active specialized ports as growth prospects have led port executives to finalize a long range 20-year expansion program. The quarter-billion-dollar expansion has been approved and environmentally endorsed. Business is also brisk at the Tampa Port, with the largest dockside cold storage facility in the country.
According to travel experts, business has improved in recent weeks in north and central Florida. A successful spring season and the availability of gasoline have heightened expectations for continued improvement in that region. A less optimistic outlook is expressed for south Florida, however, where tourism (Florida's largest industry) is heavily dependent on foreign visitors. This year, economic problems in Europe, political unrest in Central America, and the sudden strength of the U. S. dollar are discouraging foreign visitors. Merchants are predicting that some shops will not last through the summer. Tourist trade from Venezuela, which sends more tourists to south Florida than any other Latin nation, has slowed this year because the country's oil-driven economy has been stagnating after years of fast growth. State tourism figures show that foreign tourists traditionally spend about $500 more per person on visits to Florida than do domestic tourists. Tourist-generated business receipts of $16.1 billion in 1980 will be hard to match in 1981.
Agriculture
Recent rains have provided some relief from the drought
and curtailed impending water restriction plans in Florida.
Prospects for high yields for crops look promising in most District
states, and the wheat crop is expected to be two-thirds larger than
1980's harvest. Prices for hogs and beef cattle have begun to show
strength in recent weeks in response to the long-awaited reductions
in hog marketings.