Beige Book Report: Atlanta
August 11, 1981
An air traffic controllers' strike early in August administered another setback to a Sixth District economy that's been ailing for months.
Tourism was anemic even before the controllers walked out, with Atlanta's visitor traffic down for the first summer in the past four. Consumer retail spending has slowed and residential construction continues in the doldrums, as interest rates and prices continue to discourage buyers. Weakness is evidenced further by shrinking nonfarm employment, while selected District exports have come under pressure because of the run-up in the value of the dollar. A rise in farm costs, meanwhile, has about offset a recent gain in farm cash receipts.
Consumer Spending and Inventories
Retail sales in the District have
softened somewhat recently as consumers cut back on durable goods
purchases. Purchases of home furnishings have also slowed, mirroring
flagging new home sales. In contrast, relatively good sales levels
were reported for discount stores due to the heightened price-
consciousness of consumers. Inventories are being closely monitored;
no excessive accumulations were noted.
Auto dealers continue to encounter difficulties as high interest rates hold down sales. For many, though, stepped-up parts and service receipts have blunted the impact of the sales slump.
The all-item Consumer Price Index for Atlanta rose 11.1 percent from June 1980 to June 1981. Falling apparel and upkeep prices helped the index retreat from the 13 percent gain during the April reporting period. The housing component posted the largest increase.
Financial and Construction
Residential construction remains weak
throughout the District. In Atlanta, the number of homebuilding
permits issued showed a year-to-year decline for the second
consecutive month in June. The trade-up market has been particularly
hard hit. Upwardly mobile families no longer are buying newer or
larger houses every three to five years. According to a real estate
expert, a lot of people are in houses they could not afford to buy
today.
The high level of interest rates is not the only factor being blamed for the slowdown. High home prices are hurting sales. Inflation has dramatically changed the availability of homes at various price ranges in just one year. Today, 39 percent of sales in south Florida are for more than $100,000 and 10 percent are under $50,000. One year ago, the $100,000 plus share was 19 percent and the share under $50,000 was close to 18 percent.
Savings and loan associations have begun to see a flurry of activity since the interest rate "caps" were liberalized on the "small saver" accounts. It is still too early to evaluate the impact of the change, but contacts indicate sales of these certificates are brisk.
The commercial and industrial construction picture appeared strong in the District during the first half of 1981. In Florida, contracts soared 61 percent over last year. Florida, Louisiana, and Tennessee ranked among the top five states with $400 to $600 million in industrial contracts during the period despite slipping public construction.
Employment and Industry. Nonfarm employment contracted somewhat in most sectors in June following little change for the previous month. Manufacturing payroll income remained basically unchanged, as hours worked and weekly earnings advanced only slightly.
The air traffic controllers' strike is more bad news for many businesses connected with the convention and tourist trade, already faring poorly so far this summer. Local officials attribute the problems to the high prices of fuel, airplane tickets and motel rooms. A promotional campaign for both Atlanta and Jacksonville, Florida, aimed at attracting travelers from neighboring states, has been undertaken.
Spot checks reveal that many companies are bracing for a drop in business during the traffic controllers' strike. A major hotel announced that it would cut rates by 50 percent for any stranded passengers, a move to fill empty rooms caused by cancellations. August had been traditionally Atlanta's busiest tourism month.
District export growth varies by commodity and trading area. Soft markets for such products as poultry, textiles, phosphates and other chemicals, and timber are mainly due to the currently weak European economies and the growing foreign exchange value of the dollar. Markets for poultry, paper, and timber products in Latin America, the Middle East, and the Far East, particularly Japan, remain steady. Soybean export markets generally have weakened under increased price competition. Foreign tourist receipts are up, but the growth in numbers and spending per capita are down. First half- year 1981 imports of food and live animals, manufactured goods, and machinery are declining while oil imports, due to higher prices, are up over the first half of 1981.
Agricultural Highlights. Farmers increased acreages of six major crops, with cotton plantings growing most. But, dry weather is again restricting crop growth and yields most notably in Georgia and Florida.
A recent spurt in hog prices has lifted farmers price levels, and the large winter wheat crop has helped boost farm cash receipts by 10 percent from the level during the first half of 1980. However, the rise in farm costs, led by the increase in interest rates, has about offset the gain in cash receipts.