Beige Book Report: Atlanta
October 27, 1987
Employment continues to expand in the District. The oil and chemical industries are increasing output and adding workers. Retail sales are mixed, with consumer durables and autos showing some weakness. Housing construction has slowed, although commercial construction shows some strength. Exports are increasing; the weaker dollar is in part responsible.
Employment and Industry
Most labor market indicators suggest continuing healthy employment
growth. The region's unemployment rate has ranged between 6.5 and
6.9 percent since April. Employment continues to improve in the
energy-producing regions, with Louisiana's unemployment rate having
fallen 4 percentage points since the first of the year to 10.4
percent.
Demand for drilling machinery has strengthened, expanding employment rolls. The chemical industry is posting rapid productivity growth and high capacity utilization rates as a result of efficiency measures and strong product demand. The pulp and kraft components of the paper industry also continue to benefit from the drop in the value of the dollar. The weakening of the dollar has helped to curb tire imports to the point where some domestic producers have been able to raise prices. Prospects are bright for the region's aluminum producers, and prices are strengthening as a result of strong demand. Recent government contracts are helping aerospace firms in the region. Electronic components continues to benefit from defense spending and a resurgence in computer sales.
Consumer Spending
Retailers throughout the District report strong sales during the
month of September. However, sales of appliances remain lackluster
in spite of heavy promotions. Prices on foreign apparel are
increasing, but foreign electronics producers are holding the line
on them. Domestic car sales in the District have been disappointing
in the last month of the model year. New vehicle registrations
through July continued to reflect the sluggish car market,
particularly for domestic autos.
Registrations in the Southeast rose 2 percent, with the rise accounted for by light trucks and vans. By July, imported cars accounted for 38 percent of sales, up from 31.7 percent a year earlier.
Construction
August home prices increased 8 percent over the same period last
year. Experts say the uptick has been the biggest leap in home
prices in the past decade. New starts, however, continue to decline
throughout the District. Housing starts seem to have bottomed out in
Louisiana, and sales of existing homes had the best second quarter
performance since 1981. Apartment, condominium, and retirement
construction remains firm in Florida, the only state in the District
to show no decline in multifamily permits.
Commercial construction markets are mixed. The value, square footage, and number of commercial projects in the Southeast increased in August over year ago figures and are now expanding at rates similar to the nation's. Office construction is strong in Nashville, central Florida, and metro Atlanta. Commercial construction slowed in Mississippi from year-ago levels, and commercial property values declined. After weakness in nonresidential construction earlier in the year, new highways, streets, and bridges helped boost each state's August total nonresidential construction figures over those of August 1986.
Financial Services
Total loans at large commercial banks have turned up following a
first- and second-quarter decline. A large jump in real estate loans
seems to be fueling the growth while consumer loans are close
behind. Consumer loans have grown more slowly at large commercial
banks because of competition from nonbank sources. Business loans
have slowed as corporations turn to increased issuance of commercial
paper.
Atlanta, Birmingham, Miami, and Nashville report improvements in mortgage collections. Consumer foreclosures are decreasing, although commercial foreclosures are increasing. Mobile, New Orleans, Jackson, and most of south Georgia report increases in delinquency rates. Mississippi thrifts note that an increased number of bankruptcies are being filed.
Tourism
Tourism ranged from relatively flat moderately increasing over last
year. In Miami and Jacksonville, two festival malls that opened
during the summer are exceeding expectations. Orlando is projecting
a 17 percent increase in convention activity over last year, and its
civic center expansion is expected to be completed late in 1988.
Georgia, Tennessee, and Alabama have had moderate increases in
tourist activity.
Port Activity
Except for New Orleans, total shipments from all District ports
exceeded the nation's 6.8 percent gain for the 12 months ending in
July 1987 over the previous 12 months. Georgia's exports of forest
products, kaolin and manufactured goods are growing rapidly, and the
state is becoming a major entry point for imported cars. In Miami,
exports are growing faster than imports for the first time since
early 1987 because of growing shipments to Latin America.
Mining
District coal production for the first three quarters of 1987 was
approximately 8 percent less than during the same period in 1986.
The cost of coal to electric utilities in the region has also fallen
about 8 percent.
There are one-third more exploratory drilling rigs in operation in the District than a year ago, but this is still only 40 percent of the number operating in 1985. Crude oil production in the District continues a slow decline begun in early summer, reaching a level 6 percent below 1986 average daily production. There is considerable interest in the natural gas reserves at Mobile Bay because Florida's gas consumption is expected to increase 42 percent over the next decade.
Agriculture
Although drier weather has lowered crop yields, they remain above
1986 levels. Except for feed grains and rice, total crop output is
up from last year. Reductions in acreage, higher yields, and stable
or higher prices, are expected to improve net revenue substantially.