Beige Book Report: Atlanta
August 3, 1987
The Sixth District's economy shows signs of moderate strengthening in a number of sectors. Unemployment in the Southeast continues its downward trend assisted by sizable job gains in services and a slow rebound in manufacturing. Retail sales are rising moderately, and tourism is also providing a positive impact. Construction presents a mixed picture with pockets of brisk activity interspersed among slowing areas. Prospects in agriculture appeared generally favorable at mid-July although hot, dry weather again threatened crop yields.
Employment and Industry
Unemployment rates continue to decline in the Sixth District. The
May rate of 6.8 percent was the lowest in seven years for the
region, and the downward trend apparently continued according to
preliminary June reports. The largest employment gains have been
posted in the service-producing sectors; however, manufacturing
employment has improved steadily since the first of the year.
The chemical industry is rebounding, aided by the weak dollar and low raw material costs. The recent upturn in oil prices has encouraged drilling activity, which has stimulated the oil equipment industry. Bank directors report that orders and shipments for furniture manufacturers remain strong, and consumer purchases of furniture are accelerating. Textile inventories are reported to be at acceptable levels, and many plants in the region are operating near capacity at present.
Consumer Spending
Retailers in the District report sales are matching modest national
gains, on balance. Atlanta sales, according to some retailers, show
signs of picking up. Florida is the Southeast's best performer,
while Mississippi and Louisiana are the worst. Georgia, Alabama, and
Tennessee are performing about on par with the nation.
District car dealers report mixed trends for June and July as foreign car sales outperformed the sluggish movements of domestic cars. As in recent months, most dealers handling GM models report weak sales and unwanted inventory accumulation. One surprising bright spot emerged in New Orleans, where the stabilization of oil prices and renewed drilling activity spurred the best June car sales performance in that location in four years. Overall, the Southeast's new car registrations this year through the end of May were off by 1 percent compared to the first five months of 1986, while the nation's rate dropped by 9 percent.
Construction
Single-family building permits in the Sixth District (three-month
average, seasonally adjusted) declined in May after holding steady
for three months. However, District realtors anticipate that the
softening of mortgage rates in recent weeks will boost housing
activity. The spring uptick in rates discouraged residential
builders and apparently priced many first-time buyers out of the
market for new homes. Some have turned to lower-priced existing
homes, which, contacts report, are generally selling well.
Market performance varies throughout the District. Jacksonville reports strong sales, and new residential construction continues at a healthy pace in the suburbs of Jackson, Mississippi. The worst performance is reported in New Orleans, where sales are slow and prices are stagnant.
The Southeast's prolonged slowdown of commercial construction has enabled markets to firm slightly. Orlando reports a decline in vacancy rates for commercial space, and prices for industrial space in Atlanta are strong. Montgomery contacts note active commercial construction.
Financial Services
Total loan growth at the largest commercial banks edged downward in
June. Growth of both business and real estate loans slowed, while
consumer loans grew only slightly. Around 50 percent of the total
credit available through home equity lines is currently in use, say
District bankers. While many line holders are using the credit to
pay off consumer debt, many are also using it to make major
purchases.
Tourism
Tourism throughout the Southeast is matching last year's
performance. Florida leads the District as it benefits from Disney's
anniversary publicity. The state's hotel occupancy rates have
increased from last year. There is positive news for Mississippi in
the revival of tourism In Natchez and Vicksburg and for Louisiana in
the planning of the Pope's visit in September. Alabama, Georgia, and
Tennessee are realizing earlier expectations of a good summer
tourism season.
Port Activity
Rising exports are gradually offsetting the volume lost from the
sluggish pace of imports at several District ports. In Miami, for
example, increased exports to Latin America are more than
compensating for reduced imports. In New Orleans, port revenues are
up from last year, and the prospects for continuing gains in export
cargo and employment are quite promising. In Savannah, exports are
also gradually rising, led by higher shipments of kaolin to Europe,
machinery to Brazil, and forest products to many countries.
Mining
The number of active oil and gas drilling rigs in the District rose
sharply in early July to reach the highest level since April 1986.
Most of the increase occurred in Louisiana and Alabama. The upsurge
is in response to higher petroleum prices and expectations of
improvement in the price of natural gas. Substantial drilling
activity is occurring in the Gulf of Mexico with plans for further
exploration and development. Because almost one-third of the
nation's natural gas supply is located in the Gulf, this area will
continue to be developed, which bodes well for southeastern
seaports.
For the first half of 1987, District coal production was 11 percent less than the same period of 1986, and coal prices averaged 6 percent lower.
Agriculture
Crop conditions in the Southeast are favorable at present, but if
recent hot, dry weather continues, yields could deteriorate. The
broiler industry may experience losses as prices have fallen 20
percent below a year ago in the face of slowing demand and large
supplies.