Beige Book Report: Atlanta
December 1, 1986
Economic activity in the Southeast remains mixed. Manufacturing employment has posted little growth, although employment growth in services is accelerating. Residential and commercial construction is active, but there has been a shift away from multi-family dwellings and office building. Lending has remained strong, but consumer purchases of cars and other durables have slowed. Stabilized oil prices have prevented further economic decline in the western part of the District. Crop production and income will be down substantially, although citrus growers should do well.
Employment and Industry
The District's unemployment rate for September was steady at 8.1
percent. The services industry kept its lead over all industries in
both the level and growth rate of employment. Employment in the
trade sector grew by 3.8 percent from a year ago in September, a
slowing from 4.8 percent in the previous year. By contrast,
construction employment growth has been flat since April.
Manufacturing employment has registered little change since the first of the year. Lack of demand for petroleum-related machinery and nuclear power generating equipment has forced layoffs in some regional states. A slump in some capital goods markets—electronics and construction equipment—has hurt fabricated metal producers. Labor disputes in the steel and transportation equipment industries have idled nearly 4,000 workers in Alabama.
More positively, apparel and textile employment has been increasing since July. Employment growth for food processors has been steady; falling commodity prices have stimulated this industry.
Consumer Spending
Sixth District retailers reported moderate sales gains during
October. Cooler weather spurred apparel sales across the region, but
movement of big-ticket items was sluggish. Retailers in Tampa,
Orlando, Atlanta, and Nashville noted strong consumer demand induced
by fierce price and promotional competition, cutting profit margins.
Alabama, Mississippi, and Louisiana retailers, however, report weak
demand and less vibrant competition. Sales in Louisiana are expected
to remain very weak despite the recent firming of oil prices.
With the ending of aggressive marketing and financing programs in October, District car sales returned to the sluggish pace prevailing earlier this year. Car dealers in the region also fear that September sales have borrowed heavily from demand late this year and early in 1987.
Construction
After declining in July and August, single-family building permits
in the Sixth District turned up in September. Georgia led the nation
in year-over-year sales growth of existing single-family homes.
Florida placed third in the ranking, while only one state in the
nation suffered a worse sales decline than Louisiana. Nashville
stands out among District cities as a hotbed of activity.
Contacts in Miami report an all-time high of condominium inventories, and poor demand has brought multi-family construction in New Orleans to a standstill. Although builders in Atlanta and Nashville note slowing of construction, they believe their markets will fare better in 1987 than most in the nation.
Commercial developers across the Southeast report slowing activity and anticipate further deceleration in the coming months. New Orleans remains the region's weakest market, but contacts there report some expansion of retail construction to meet the demands of tourists and conventioneers. The south Florida market remains saturated with office, retail, and industrial space. Atlanta's glutted office market is leading developers to focus on retail and industrial construction. The relatively short construction time required for completion of such projects also suggests these markets will soon be saturated. Nashville developers are confident that their market will continue to experience strong but "controlled" growth.
Financial Services
Total loans at large Sixth District banks grew at the same rate in
September compared to a year ago. Real estate lending dipped
slightly from August, while business and consumer loan growth
maintained its August pace.
In response to the effects of tax reform, demand for home equity loans has surged across the region. Bankers say these loans have gained popularity because they retain at least partial interest deductibility under the new tax laws. Some bankers expect many homeowners to substitute these loans for card and installment credit.
Tourism
Travel to the Southeast remains generally strong. Automobile travel
has increased dramatically over last year. Passenger volume in the
region's airports is also up, due largely to the addition of new
flights. Cruise ship bookings are solid, according to industry
sources. Convention business is up throughout the region. Year-to-
date tax revenues from the hotel industry are up around 10 percent
over last year. However, in response to a large revenue shortfall,
Louisiana has closed 22 out of 32 state-operated visitor facilities
and is laying off tourist-related government employees.
Agriculture, Forestry, and Mining
Since its low of $12.25 per barrel in midsummer, the price of Gulf
Coast sweet crude petroleum has climbed approximately 15 percent to
reach $14 in November. The price improvement was accompanied by a 20
percent increase in the number of oil rigs operating in the
District. Even so, the 140 active rigs in early November equaled
slightly less than half of the number a year ago. Approximately 2.3
million tons of coal were mined in October, down one million from
October 1985 and roughly 9 percent less than in September this year.
Despite a 5 percent coal price decline, oil and natural gas remain
highly competitive.
Agricultural conditions are mixed; poultry and livestock producers are doing rather well, but income is down for most crops. Recent unfavorable weather and insect and disease damage have lowered field crop prospects in Louisiana, while recovery from the drought in Tennessee and Alabama has improved expected yields. Florida orange and grapefruit crops are projected to be almost 8 percent greater than last year. The lumber market has been relatively stable in recent weeks; prices have been modestly higher than during the summer but 10 to 20 percent less than last spring.