Beige Book Report: Atlanta
October 23, 1984
The Southeast's economy continues to progress in spite of nagging difficulties in several areas. The strong dollar and high mortgage interest rates have retarded manufacturing employment growth and dampened somewhat the region's usually dynamic housing industry. Inadequate dealer stocks of popular automobile models and drought- reduced crop yields have countered the general expansion. On the positive side, steady consumer spending continues to be the principal impetus behind the region's growth, followed by swelling defense-related payrolls, strong commercial construction and a rebound in housing, and improving tourism.
Employment and Industry
In August, the District unemployment rate of 8 percent continued
near the level that has prevailed since last April. Florida and
Georgia posted unemployment rates slightly over 6 percent,
contrasting sharply with Alabama and Mississippi at 11.2 and 11.3
percent, respectively. Weakness in some industries has been offset
by strength in others. Expectations for forest products have been
revised downward as a result of slackening demand for housing and
Canadian competition. In spite of productivity-enhancing investments
by domestic textile and apparel firms, foreign producers continue to
increase market share due to the strong dollar. Chemical companies
are reacting to foreign competitive pressures by reducing production
costs and shunning large projects that could result in excess
capacity.
In contrast, defense and related industries are boosting payrolls throughout the region. Shipyards doing Navy work, high-tech electronic firms and aerospace companies are all experiencing rapid growth. Appliance producers expect their record-breaking sales to continue through year-end. Oil and gas drilling activity should remain strong in the months ahead and show signs of increasing stability. Carpet manufacturers report strong sales, especially for commercial use.
Consumer Spending
Retail spending through September exceeded its year-ago level by a
substantial margin. Retailers in the Southeast reported varying
sales gains for August, but generally robust September sales. The
Atlanta, Orlando, Jacksonville, and Miami metropolitan areas
continue to outpace the nation in department store sales. Clothing,
electronic items, and housewares are early fall best sellers.
A low inventory of popular models weakened auto sales during August and September, according to car dealers throughout the region. Although August car and truck registrations in the Southeast fell sharply from previous months, year-to-date figures were 19 percent ahead of the same period last year. A major auto producer's sale in the region and the nation advanced 10 and 18 percent, respectively, in the first nine months of 1984 compared to 1983.
Construction
Residential construction in the Southeast remained surprisingly
buoyant through early October, particularly in central Florida and
the Nashville area. However, single- and multifamily building
permits are down from their year-ago levels. Builders believe that
uncertainty about the overall state of the economy and the impact of
government deficits, in particular, is keeping interest rates high
and limiting housing activity. The downward creep in mortgage rates
over the past three months has increased the popularity of fixed-
rate contracts. Mississippi's housing market got an infusion of new
money from the state's $175-million housing bond issue designated
for below-market-rate home mortgages. Commercial construction
continues to surge, with office construction leading the way.
Financial Services
Total loans by large commercial banks were up in September over
August. Both commercial and residential real estate loans showed
continued strength in August and September, while some leveling off
occurred in business loans. Contacts attribute slower business
lending to corporations reaching desired inventory levels and
moderating economic growth. They also report that a large share of
commercial real estate loans in September was for the building of
office parks, strip shopping centers, and hotels. August mortgage
commitments at S&Ls dropped 9 percent from July and were 11 percent
below commitments for the same month last year.
Tourism
Early fall activity in the tourism industry exceeded its year-
earlier performance. Visitor center registrations were up in every
state except Tennessee. Many attractions posted double-digit
increases in attendance. Boosted by strong business and improved
convention travel, hotels seemed to have filled more rooms without
lowering rates. Despite poor average daily attendance of 38,000 at
the World's Fair, New Orleans hotels have enjoyed a 12 percent
increase in occupancy and a $10 average increase in room rates.
Air traffic remains strong at most District airports. Contacts cite renewed travel interest following the Olympics and ideal weather as two main factors contributing to the overall high level of tourism activity in the District. The start of the school year has not dampened travel to the extent expected.
Agriculture
Significant changes have occurred in the prospects for soybeans and
cotton in the region over the last month. A late summer drought in
Georgia has caused projected soybean production to fall by 12
million bushels for an approximately $75-million decline in revenue.
On the other hand, weather has favored cotton production, causing
estimated yields to approach or surpass record yields of previous
years. The net effect of these changes is likely to be a modest
decline in net revenue to the region's producers of major crops.
The U.S. Department of Agriculture projects a larger domestic supply of orange juice this year than in the 1983-84 season. The Florida crop is expected to be about 30 percent smaller than in 1980-81, the last year without freeze damage. Citrus canker has not yet been found in bearing groves but was discovered in a seventh Florida nursery.