February 12, 1975
Economic prospects in the Sixth District economy appear to be turning cautiously optimistic. Layoffs are still being reported but not of the magnitude of the past few months. Local area businessmen and directors' opinions are mixed concerning the impact of automobile price rebates and post holiday retail sales. Generally, sales seem to be holding up better than previously expected. Besides auto rebates, several other instances of price cutting were reported again this month. Industrial and commercial investment plans, despite some retrenchment, remain reasonably strong in the face of last year's weak economy and little improvement yet this year.
Unemployment in the District continues on the rise, as it does nationally, but the extent of the rise varies throughout the region. Florida and Georgia have been hardest hit, and unemployment rates in these states are higher than the nation's. Both states are typically well below the national unemployment rate. Alabama and Mississippi, though showing some increases in unemployment, seem to be holding their own. For example, Alabama steel producers are turning their backs on new customers; producers indicate that their books are full through 1975. Union Carbide Corporation announced a large expansion ($9 million) at its steel mill in Gadsden, Alabama. Bessemer freight car building plant, the world's largest and most diversified facility of its type, is booked solid with orders through this year. Reports of job layoffs are fewer and more scattered than in the previous 2 or 3 months. South Central Bell will lay off 250 employees in Alabama and will trim capital spending by $82 million. A large Florida truck-trailer company has laid off one-half its work force. Three hundred workers will be furloughed by the Tennessee Valley Authority. A Louisiana paper mill which makes liner board used by many national companies has closed down, idling 335 workers. A large plywood manufacturer has also recently shut down its facilities. North Georgia's carpet industry has recently predicted that 1975 will be a better year than previous bleak forecasts have indicated. At a recent carpet industry meeting, an industry representative reported that January 1975 sales surpassed those of a year ago. Alabama's textile industry is also expecting a good year.
Regional auto dealers are reporting improvement in sales as a result of the rebate programs. Florida directors indicated that sales are up from previous months but still below year-ago levels. Sales are restrained, however, by the availability of credit. Showroom traffic has been very heavy. However, heavy-duty truck sales have fallen to the lowest point in many years in Central Florida. New Orleans directors report mixed responses to rebates. A New Orleans area director noted that the rebates have materially enhanced showroom traffic but not new car sales. A Mobile, Alabama director reports that the rebate has boosted sales significantly and that dealers are very enthusiastic. Three Baton Rouge, Louisiana car dealers indicated that the rebates were responsible for 50- to 100-percent sales increases. But it was interesting to note that each of the three dealers stated that they are now worried about what will happen to auto sales when the rebate program ends. A survey of Alabama auto dealers indicates that rebates have caused great increases in showroom traffic and substantial increases in sales, in some cases over 100 percent at 23 major dealers around the state. It was also reported that several large Alabama industries with ties to the auto industry were giving $100 rebates to employees who purchased new cars.
Retail sales seem to have held up fairly well in January. Directors' responses to questions regarding the extent preholiday sales campaigns siphoned off January sales were mixed. At least two reports of strong January sales were received. One indicated that retail stocks were the lowest in years, creating a problem until spring delivery of merchandise. A Central Florida retailer, however, believes that December sales promotions did eat into January sales. Louisiana directors reported that retailers were satisfied with January sales levels. Apparently, December promotions did not drain January sales. A report from the Alexandria, Louisiana area, however, indicates that retail sales are sluggish and not responding to intense price promotions.
Last month we reported a surge in holiday tourist traffic in Florida. In early January, tourist activity fell off drastically but has rebounded again, at least in Central and South Florida. One director reports that businessmen in central Florida seem to have a renewed air of optimism since the first of the year.
Besides the car rebates, several instances of price cutting were noted. A South Florida area retailer indicates that at present inflation is dead in soft goods. He notes that there is weakness in both apparel and textile goods prices. An Alabama apparel retailer indicates that while leisure wear is selling well, men's clothing is one area where inventories remain abnormally high. He notes that they are now in a whole new ball game for clothing manufacturers; they have adjusted their thinking, and it appears now that prices for fall 1975 will be reduced from fall 1974 prices. There is considerable price cutting on Florida's housing, condominium, and rental-unit markets. Direct cuts have appeared in resale markets, while discounts, "free gifts," no leases, no deposits, and low early-months' rent are being offered on new home and rental housing. One Florida director reports that 55 townhouses previously priced in the $55,000-range were reduced to $36,000; within a week they were all sold. Savings inflows continue at savings and loans throughout the District. These institutions, particularly in Florida and the Atlanta area, are now beginning to seek new mortgage commitments. Rates have been reported in the 8 3/4- to 9-percent range by some savings and loans.