July 15, 1970
According to reports from directors and others, there is no serious deterioration in production and employment in any area. Only one director mentioned fear of a liquidity crisis. While several instances of price shading were cited, evidently there has been no great increase. Reports of economic softness are being countered by news of strength. Lockheed continues to reduce employment by about 800 monthly, but Gulf Coast shipyards should soon be substantially increasing employment. Weakness in construction expenditures in some areas is being offset by large projects underway or planned in others.
Any increase in price shading apparently has been only modest. We
were told that shading is difficult to detect because it often
occurs in subtle forms such as services and transportation charges.
An example of a subtle price shading is provided by the Florida
orange juice industry. For a
six-week period, virtually all small
producers—supplying about 40 percent of the market—are giving a 30-cents per case promotional allowance to retail stores. It is widely
understood that the retailers spend a good deal less than the
allowance on promotion. Isolated incidents of shading have been
reported on reinforcing steel and fabricated aluminum products as
well as lumber and furniture. A large corporation has reported
receiving lower prices from suppliers, particularly in paper and
lubricants. A fiberglass boat manufacturer reports lower prices from
suppliers of resins and chemicals.
Residential construction remains in the doldrums in some areas such as Nashville, and strikes are slowing down large projects in Atlanta, Knoxville, and the Gulf Coast. However, a South Florida director reports building permits for residential units in May exceeded 2,000 for the first time in four months, mostly because of large condominium and residential complexes. Announcements of large apartment projects continue to be made, such as a 484-unit project in Atlanta. In Birmingham, it is reported that a larger supply of mortgage money is available for FHA and VA loans, and a limited amount of money is available for conventional loans for the first time in several months.
Reports of reductions of work forces continue to come in, but Tennessee directors report that some previous cuts have been restored, such as an increase from a four- to a six-day week at a textile plant.
Reports of cut-backs in capital spending plans are increasing. South-Central Bell has reportedly cut back its 1971 spending plans, as have many firms in the industrial areas of the district. The Jackson State College incident has reportedly resulted in some postponing of plant locations in the Central Mississippi area, and new plant locations have been occurring at a reduced rate in Georgia. Amidst reports of a successful tourist season, several large recreation projects have been announced or undertaken. In the Central Florida area, already bracing for the opening of Disney World, Busch Gardens has announced a multimillion-dollar expansion, and a $24-million Florida Expo project is slated for the East Coast. In addition, construction has recently commenced on a $25-million "Opry Land USA" in Nashville. The Louisiana, Mississippi, and Alabama Gulf Coast areas have received some encouraging economic news. A division of Litton Industries located on the Mississippi Gulf Coast has been awarded a $24-billion contract for construction of destroyers. While some of the funds for the project are still subject to congressional approval, the contract is expected to result in an increase of 8,500 jobs along the Mississippi and Alabama Gulf Coast. Economic activity along the Louisiana Coast has stabilized as preparation is taking place for renewed oil leasing.
In the banking sector, a large Atlanta bank has become the third in the city to purchase a mortgage company. In this case, the mortgage company services mortgages totaling $240 million. One district bank reported to be receiving deposits withdrawn from New York City banks which had loans outstanding to Penn-Central.