August 8, 1990
Overview
Contacts throughout the Southeast generally see a continuation of
the slow growth they have been reporting for the past several
months. Consumer spending on big ticket items, such as autos and
houses, is turning out well below earlier expectations of moderate
growth. Businesses also report increased efforts to conserve cash by
not paying suppliers promptly. These factors are said to be causing
increased pessimism over future activity compared to our earlier
surveys. Reports on retail sales indicate at most modest growth as
compared to the same period last year. Auto dealers continue to
indicate their sales are even with or below the same period in 1989.
According to bankers consumer lending remains below last year's
levels, while real estate and business lending continue to grow at a
moderate pace. Construction contacts indicate that the overall
weakness in commercial and residential construction continues.
Except in the textile and auto related industries, Southeast
manufacturing is reportedly continuing to post modest growth. Farm
contacts estimate that the drought in June and early July has
destroyed approximately a quarter of the region's corn, soybean and
forage crops. Shortages of entry level workers are increasing but no
additional pressure on wages or prices are evident.
Retail
With a few exceptions, retail activity is reported to be growing but
at a slower pace than at this time last year. Almost uniformly,
contacts indicate that women's and children's apparel is selling
well, while men's apparel sales have slowed noticeably in the last
month. Reports on durable goods sales are mixed geographically, but
most areas indicate some pickup recently in home appliances and
items associated with home improvements. Consumers are reluctant to
purchase houses, but a desire to fix up their current housing is
most often given as the reason for the improvement in durables
sales.
In light of slow sales and a more pessimistic outlook among retailers, they report plans to reduce inventories. Retailers are also expressing concern over reports of credit tightening by commercial banks and are reportedly slowing down payments to suppliers in an attempt to conserve cash. Some manufacturers and business services suppliers noted problems collecting on growing receivables.
Auto dealers continue to report slow sales and do not expect a pickup in the next few months. Import dealers are reporting stronger sales growth than are domestic dealers. Import sales are equal to or slightly better than last year's. Dealers report that domestic manufacturers have not come forward with new incentive plans as expected, while some import manufacturers have extended their incentive programs. Almost all dealers stated that used car sales are strong and report difficulty finding quality used cars.
Manufacturing
Reports from textile producers, auto, and auto related
manufacturers, and furniture manufacturers continue to indicate
weakness; however, most other manufacturers are reporting good year-
over-year growth. Producers of heating and air conditioning
equipment as well as marine equipment, continue to note increasing
sales relative to last year. Paper producers saw a slowdown in
domestic sales in recent weeks; nevertheless a recent pickup in
export sales has allowed most to run at capacity. Pulp and wood
products production has rebounded in recent weeks amid growing
export demand. An aluminum producer reports healthy growth in sales
year-over-year and has announced plans for a new plant to expand
capacity. Sales by producers of farm equipment are also increasing
over last year as a result of the improvement in the agricultural
sector nationwide.
Real Estate and Construction
Construction contacts indicate that residential and commercial
construction remain weak, and are significantly below last year's
levels. They also indicate that the overhang of both residential and
commercial properties is being absorbed slowly. More stringent
lending standards continue to be mentioned as retarding factors for
new commercial and residential projects. The only bright spot in the
construction sector is in public infrastructure.
Financial Services
While most bank contacts indicate that business loan growth remains
slow, some noted a pickup in demand for loans by petrochemical and
medical businesses and nursing homes. Reports indicate real estate
loans continue to grow slowly. Demand for consumer loans, especially
auto loans, has slowed significantly in the last few months. A
number of our banking contacts reported concern over a rise in
credit card delinquencies and noted increasing consumer and small
business bankruptcy filings.
Agriculture
District farmers report that the June and early July drought
resulted in the loss of approximately 25 percent of the region's
production of corn, soybean and forage crops. Losses are reportedly
heaviest in Georgia and Tennessee, where two-thirds of the
District's total production of these crops occurs. Poultry producers
indicate a continuing high level of sales, especially for export
with some reporting that export demand for poultry is up 40 percent
from a year ago. District poultry producers indicate that recent
sales to the Soviet Union, several Eastern European countries and
Japan have brightened their outlook considerably.
Wages and Prices
As has been the case for the last several months, reports from
around the District revealed little new wage or price pressures.
Scattered reports that certain types of skilled labor are in short
supply continue to be received, but these are localized. Reports of
shortages of entry level workers are increasing.