Beige Book Report: Atlanta
June 24, 1986
Overview
Growth of the southeastern economy slowed since the last reporting
period, as indicated by rising unemployment. However, consumption
accelerated with strength evident in consumer lending, merchandise
and auto sales, and tourism. Activity in single-family residential
housing remains robust, but multi-family construction is weakening,
and commercial building is generally slower across the region. Dry
weather continues to damage farm revenue prospects in parts of the
region.
Employment and Industry
Labor markets weakened for District states except Florida and
Georgia from March to April. The region's unemployment rate edged up
to 7.9 percent, the third consecutive monthly increase. Textile and
apparel employment continued to fall concurrent with the nation's
record breaking April $1.4 billion textile and apparel trade
deficit. Foreign competition continues to push down domestic textile
goods prices; however, contacts report that mill-operating rates
have recently turned up in reaction to favorable retail inventory
positions. Louisiana's oil industry has shown little improvement,
and the state's drilling rig count has reached the lowest level
since 1949. Oil field service companies continue to scale down
operations; industry spokesmen see little prospect for near-term
improvement.
More positively, low oil prices are benefiting the region's many tire producers by stimulating auto usage and holding down prices of petroleum-based raw materials. A trade organization reported that regional paper producers recently increased prices in reaction to strong domestic demand for corrugated products. The Southeast's lumber industry is being bolstered by increased demand for residential housing. Lumber prices and domestic output have increased in spite of the growing volume of Canadian imports, according to industry sources.
Consumer Spending
Department store sales rose 3.7 percent in the first quarter of 1986
over the level a year earlier in metropolitan areas of both the
Southeast and the nation. Except for Louisiana and parts of Florida,
most metro areas around the District posted gains over year-earlier
levels, with Birmingham, Mobile, Nashville, West Palm Beach, and
Atlanta registering above-average increases. More recently, a poll
of District merchants suggested favorable growth in May, led by
strong apparel sales. District merchants are optimistic about the
sales outlook for the rest of the summer. District car sales
improved substantially in May from weak levels earlier this year,
helped by cheaper gas and by dealer special financing and marketing
efforts. Even so, year-to-date car sales remain below year-ago
levels when sales were brisk.
Construction
Single-family sales volume and permits issued are up in most of the
region except Louisiana since the last reporting period. Realtors in
the Miami area reported record-breaking sales during April, while
sales in Nashville are slowing slightly. However, multi-family
developers throughout the region reported increasing weakness and
voiced concern that passage of pending federal tax legislation might
lead to construction of fewer apartments and a substantial rise in
rents.
Commercial construction generally has slowed since early this year, but its strength varies widely across the District. In major office markets such as Atlanta and Tampa, vacancy rates, while still high, are beginning to rise more slowly. Retail construction is reported strong in the Birmingham and Nashville areas. Developers believe pending tax legislation, if passed, will slow commercial construction throughout the region.
Financial Services
April total loan growth at large banks in the Southeast reversed its
year-long decline with business, real estate, and consume credit all
registering an upturn. The most dramatic increase came in consumer
loans where the rate of growth increased from 14 to 20 percent.
Personal loans and second mortgages appear to be spurring the rise
in consumer loan growth; the consensus of bankers throughout the
District is that auto loans are down because of lower rates being
offered by the major U.S. auto manufacturers. A few banks In the
Southeast have cut credit card interest rates, but contacts at large
regional banks expressed intentions not to follow suit.
Tourism
Hotel occupancy in Florida is up sharply, and travel agents believe
the state will benefit from a dramatic decline in travel to
Mediterranean destinations. Georgia's contacts expect double-digit
travel revenue increases this summer over 1985. Respondents in
Atlanta are especially optimistic as cities are becoming more
competitive vis-a-vis ocean beaches in luring vacationers. Tennessee
tourist industry representatives expect record-breaking volume as
the favorable economic and political environment coincides with that
state's bicentennial celebration. Expectations are not as high in
Alabama, Louisiana, and Mississippi as in the rest of the District.
Agriculture
Planting delays and slow growth due to low soil moisture in portions
of the Sixth District will likely reduce yields of crops such as
corn, soybeans, and peanuts, although recent rainfall has provided
relief in the Mississippi Valley. With southeastern farmers planting
less acreage, coupled with the prospect for below-average yields,
production should be substantially lower this year than last.
Moderate declines in the volume of livestock marketing suggest
revenue in this sector will also fall below that of 1985. Production
of poultry and eggs, on the other hand, has increased, and profits
are growing with the rise in market prices and the decline in feed
costs.