Atlanta: September 1975

Recently announced changes in production suggest recovery in various sectors which were previously depressed. A Tennessee manufacturer has announced a 16 percent increase in the production of gas and electric ranges beginning in early September. The increase is attributed to increased orders over the past two months and will result in additional employment and restoration of operations to 70 percent of capacity. Production is resuming after a one-year lapse at a large sawmill in Georgia. Also, a Florida plant, which manufactures corrugated shipping containers, is resuming production as of October 15, following an expansion program. A Tennessee furniture manufacturer expects to begin by late September the manufacture of a new line of furniture. Production will begin with the rehiring of employees laid off since last spring and over the next six months should result in an expansion of employment.

Tourist activity appears to be strong in many areas, according to reports from directors and other sources. Hotel occupancy and associated tax revenues show increases. Some brightening has appeared in the housing market, as new permits have increased and inventories in South Florida and other areas are declining. A large life insurance company reports a decline since February in its policy lapse ratio, followed by a leveling off of the ratio of policy loans to policy reserves. These developments are regarded as signs of economic strengthening.

Members of a Georgia Purchasing Managers' Organization, surveyed from June through August, indicate that delivery times are stabilizing. The proportion reporting faster deliveries has declined markedly as of August, with most respondents indicating little further change in that month. A marked shift has also occurred in the movement of prices. The percentage reporting higher prices has risen from 25 to 40 percent; the proportion responding that prices are the same as in the previous month has risen from 43 to 60 percent; and the proportion reporting declining prices has fallen from one-third in June to zero in August. Survey results indicate that order backlogs are increasing on the whole. Throughout the period, declining inventories are reported by a substantially greater number of respondents for raw materials than for finished goods. Conversely, a larger proportion of respondents report increases in finished goods stocks than those indicating growth in raw materials inventories. Conversations with individual purchasing agents convey an impression of shorter delivery times and sporadic price negotiability. Use of escalator clauses in contracts for items as diverse as heavy equipment and food services is reported. Reemergence of delays in delivery for items such as fabricated metal products, plant, and certain printing supplies is attributed by some to overly zealous inventory reductions by suppliers rather than to shortages of goods at the point of manufacture.

This District's important poultry and livestock industry is feeling effects from grain sales to Russia. The increased cost of feed has narrowed the profit margin for eggs. Further feed cost increases or a decline in retail prices may result in additional bankruptcies among producers and a further curtailment in the size of the nation's egg flock, now at its lowest point in 30 years. In the broiler industry, placements have increased in response to an improved feed-price ratio. Although hog production has again become profitable because of reduced output, producers' decisions to increase the number of hogs await indications concerning the size of the corn harvest and its effect on the price of feed. Cattle producers had hoped for increased prices of lightweight feeder calves as a result of lower feed grain prices, but instead witnessed further declines in cattle prices as Russian purchases increased the cost of grain. A substantial number of producers may be unable to survive another year of depressed cattle prices.

Recent press reports indicate that, with the possible exception of Tennessee, shortages of natural gas will be felt primarily by industrial users served on an interruptible basis. Reports of adequate supplies for residential and commercial customers come from the state energy office in Atlanta as well as a large utility company which maintains underground storage facilities for natural gas and a variety of supplementary sources of supply. The principal pipeline supplier of gas also confirms the adequacy of supplies, except for large industrial customers such as electric utilities using gas as a fuel for boilers.

Executives of two major regional electric utilities discount the threat posed by a gas shortage to their companies' operations. One relies primarily upon coal as a fuel; the other, which in the past has depended primarily upon natural gas, is in the final stage of an extensive conversion program to permit alternate use of fuel oil. Provisions include facilities for the supply and storage of liquid fuels. A series of nuclear-powered generating facilities is being constructed by a major regional utility holding company, and additional coal-powered units are also under construction. Utility spokesmen voice the opinion that users of natural gas have been tardy in developing alternate fuel sources, in part because of reluctance to confront the problem and also because of the impediments to additional investment posed by shortages of capital.

A leading electric power supplier in this region anticipates a normal cyclical increase in industrial demand for power because there is no expectation of natural gas shortages severe enough to seriously curtail the operations of its customers. The technical difficulty was also noted of conversion from gas to coal as a boiler fuel. Use of coal involves substantial materials handling problems and requires storage facilities and much more complicated equipment with reduced reliability.