Beige Book Report: Atlanta
June 20, 1990
Overview
Consistent with reports received since March, our business contacts
continue to indicate generally slow growth throughout the Southeast.
Retailers around the District convey a mixed picture but generally
note that sales growth is slower than last year with apparel doing
well and durable goods picking up but still off from last year's
pace. Reports from auto dealers continue to show sales at or below
last year's levels. Manufacturers, except for textile, auto and
auto-related producers, are seeing some strengthening of sales,
which is allowing planned capital expenditures to progress. Because
of generally overbuilt markets, contacts in the construction sector
continue to indicate weakness and see no quick relief. Financial
institutions again report weak loan growth. Little wage or price
pressure is being reported in the District, although reports of
shortages of skilled workers are increasing.
Retail Sales
Retail activity in the District is generally reported to be growing
but at a rate somewhat slower than last year. Apparel continues to
be mentioned as the backbone of sales growth; several merchants
indicated some pickup in durable sales. Department store contacts
report sales growth on a par with or slightly above expectations
earlier this year. Appliance and other consumer durable sales have
reportedly declined recently in line with the slowdown in
residential real estate sales in certain areas. However, contacts
report that furniture sales in the Southeast have picked up in
recent weeks and are now growing a percentage point or two faster
than last year's levels. Reports from do-it-yourself specialty
stores indicate strong growth in building materials and related
sales.
Reports from auto dealers indicate that sales weakened further recently and one contact speculated that rumors of increased manufacturers' incentives on the forthcoming 1991 models are hurting current sales. A majority of the dealers, however, expect some pickup in activity in coming months, especially if those dealer and/or consumer incentives are put in place by manufacturers.
Manufacturing
Manufacturers in the District point to a mixed picture, but those
not associated with textile or auto and auto-related production
generally indicate that activity levels are picking up. The slowdown
in new residential construction, which reduces demand for new
carpets and drapery, and greater competition from foreign apparel
producers are reportedly taking their toll on southeastern textile
and apparel producers. Job losses continue to be reported in these
industries although contacts generally believe activity will pickup
in the third quarter. The weakness in auto manufacturing is
reportedly affecting suppliers; tire and glass producers are the
most recent to feel the strain. One glass producer has been
adversely affected by both the slowdown in auto production and
construction, and is trying to offset the impact by lowering prices
and emphasizing export markets. Manufacturers of heating and air
conditioning equipment report that consumer demand has strengthened
over first quarter levels, especially for replacement equipment.
Producers of industrial pumps and metering equipment report record
sales caused mostly by increased export demand. Pulp and paper
producers also report benefiting from strong export demand.
Producers of marine equipment are reporting a noticeable improvement
in business activity and attribute this to the improvement in the
oil and gas industry. These producers indicate that capital spending
to expand capacity is now being actively considered. Despite current
weakness in demand, certain manufacturers of major household
appliances and fixtures report that they are building new
manufacturing facilities in the Southeast.
Real Estate and Construction
Construction contacts continue to indicate weakness in residential
and commercial construction. They attribute much of the weakness to
overbuilt markets but reports of more stringent lending conditions
imposed by financial institutions continue. Public infrastructure
and industrial building are the only sectors where strength is
reported. Reports from Florida indicate that the new limits on loans
to a single borrower imposed on savings and loans and a new state
law requiring concurrent additions to public infrastructure in
conjunction with new developments are also adversely affecting
construction in that state, and our contacts around the District
indicate no relief to this construction slowdown is in sight.
Financial Services
Several bankers noted a continuation of weakness in consumer loan
demand. These bankers report business loan growth is also slow.
However, the majority of our bank contacts indicated no change in
credit policies and none of our business contacts indicated problems
obtaining credit. Businesses that are doing well report that
financial institutions are encouraging them to borrow. One of our
contacts also indicates that his institution has tightened its
lending standards--requiring stricter documentation and more
collateral--in the last few months, especially for real estate loans
and to a lesser degree for small business lending.
Wages and Prices
Reports from around the District reveal little change in wage or
price pressures. A few of our contacts noted that certain types of
skilled labor are in short supply, but these tight markets are
localized and have not resulted in increased wage pressures. With
the resurgence of the energy sector, contacts noted that qualified
welders and pipe fitters are in especially short supply. No new
price pressures were mentioned by our contacts.