Beige Book Report: Atlanta
September 19, 1990
Overview
Business contacts throughout the Southeast indicate some further
deceleration from the slow pace of growth reported in recent months.
Uncertainties associated with the Mid East crisis and higher oil
prices are reportedly adding to consumer caution. Retailers report
that they are generally reducing orders for new inventory in light
of anticipated consumer resistance and their expectations that sales
growth will remain sluggish through the fourth quarter. Auto dealers
confirm that sales remain soft and note particular weakness in the
markets for high priced autos and used cars. District bankers
indicate that growth in consumer and real estate lending was weak
while commercial lending declined this past summer. Southeast
manufacturers, however, still report generally moderate growth
except for products related to the construction and auto industries.
Shortages of skilled workers continue in a number of areas.
Retail
Reports from southeastern retailers indicate flat to modest sales
growth during July and August relative to the same period in 1989.
Expenditures on both durable and nondurable goods varied
considerably around the District but generally durables were weak
while apparel sales showed a bit of strength associated with back-
to-school clothes purchases and summer clearances. A representative
of a large retail chain indicated that furniture and fine jewelry
sales were off significantly from 1989 levels in July and early
August, for the first time this year. The general sentiment among
southeastern retailers is that already weak consumer confidence has
been negatively impacted by the Mid East crisis and oil price
advances during the last six weeks. As a result, these retailers are
reducing the size of their orders to manufacturers expecting that
growth in sales will remain sluggish through the fourth quarter.
Auto dealers continue to report that sales were well below levels seen a year ago, especially during the first two weeks of August. Foreign models again sold better than domestic ones. A few dealers indicated consumers are more resistant to the higher priced models and said that sales of new autos priced under $15,000 were comparatively better. Some noted that it was too soon to detect any switch toward more fuel-efficient models.
Financial Services
Bankers in the District generally report that slow growth in real
estate and consumer loans over the summer was not sufficient to
offset declines in commercial lending. The weakness in commercial
lending is said to be related to some deferred capital expansion
plans and lean business inventories. A few bank contacts indicated
they had further tightened credit standards in the last month. A
number of others said they had not tightened standards but were
adhering more closely to existing criteria. Most bankers, however,
agreed that money is available for good projects and that reports of
tighter credit seem exaggerated.
Growth of consumer loans in July and August was reportedly "anemic." Bankers indicate that demand for auto loans continues to weaken, but they continue to indicate a moderate expansion in home equity lending and single family mortgages.
Manufacturing
Manufacturers in the Southeast indicate moderate growth in sales
except for construction and auto-related products. Paper mills are
reported to be running at capacity levels, partially due to export
activities and coal production is picking up. Pipe manufacturers
report demand by the domestic oil and gas industry is strong.
Chemical and plastic producers also noted a continuation of a recent
slowdown from strong growth.
Weak new and existing home sales continue to impact the southeastern textile industry. Carpet producers indicate demand continues to be soft and that downward price pressures are evident at the wholesale level. They do not anticipate any improvement for some time. New layoffs by southeastern tire producers were reported and an auto assembly plant was closed for a week due to poor orders. Apparel producers note continuing weakness, adding that competition from imports is intense.
Wages and Prices
Scattered reports that skilled workers are in short supply continue
to come in from around the region, especially from the oil and gas
producing areas. But these shortages have not resulted in any new
upward wage pressures. A union contact indicates that wages among
his constituents rose 3.8 percent during the last 6 months compared
to 3.5 percent for the previous 6 months. Prices of industrial
commodities were steady, with the exception of sharp increases in
the energy sector. Freight costs are reportedly up 1.5 percent since
early August due to the recent fuel price increases. Most industries
report that the higher energy costs are not yet being passed on to
consumers.