March 10, 1976
Economic expansion continues to accelerate in the Southeast, despite some lingering soft spots. Auto sales, department store sales, and tourist spending are strong. Construction activity is reviving in some areas of the Southeast but remains feeble in much of Florida. Manufacturing activity is still mixed. Purchasing agents report only a slight tendency to rebuild inventories. The persistent rise in mortgage delinquencies may have stabilized. In agriculture, soybean and rice growers face unencouraging prospects, while the outlook for cotton growers and livestock producers has improved.
Consumption spending remains strong. Reports of motor vehicle sales indicate continuing strong gains from last year, concentrated to a high degree in the larger, fully equipped models. Small car sales, including most imported models, remain weak and inventories are top heavy. Dealers report improved profits. The uniformity of these reports is impressive.
Most general merchandise retailers report continuing strength in their sales. Some report that they are rebuilding inventories. Despite limited indications of softness in February, vigorous sales are expected during and after Easter. Housewares manufacturers indicate strong sales of nondurable items during January and low retail inventories; in addition, manufacturers' inventories are depleted and many items are back ordered.
A strong tourist season is in progress, according to directors' reports from Mississippi, Louisiana, and Florida. Hotel and motel occupancy has increased, fully occupied hotels in some areas have been providing accommodations in conference rooms, and rental cars are scarce.
Revival in the construction industry appears to be beginning. The market for construction equipment in Alabama has been strong in recent weeks, because contractors and builders expect a strong housing market in the coming year. Residential construction gains in Alabama are expected to continue. In commercial construction, bids are being solicited for an increased number of contracts. In some areas, new residential developments are under way. In Louisiana, increased mortgage lending is reported. Home construction has increased, and better quality apartment units are completely occupied. Construction of previously dormant projects is resuming in several areas, and existing apartments are being renovated. A major Atlanta real estate firm expects to begin new condominium construction this fall, but construction activity in south Florida remains very weak.
Conditions in manufacturing are varied. The mobile-home industry has felt an increase in sales, production, and employment during the past two months after reductions spanning two years. In Georgia, production declined from 76,000 units in 1973 to 13,000 units in 1975. A large number of mobile-home plants are reportedly for sale and others are in limbo. Production at a major tire company plant has shifted from a five- to a six- day week; however, this increase has been caused by strike hedging. Continued demand increases are reported throughout the paper industry, accompanied by price increases and expansions of facilities. Lumber demand continues to improve in the Southeast, with the exceptions of south Florida and Atlanta; prices continue to rise. Orders are increasing for lumber used for veneers and furniture manufacturing.
Steel production is down, reflecting a dearth of orders. Metal fabricators likewise report reduced sales volume; some also indicate excessive inventories. A manufacturer of railroad rolling stock has reduced its labor force from 3,200 to 1,500 as a result of sharply reduced demand for coal cars. Employment is expected to decline further, as present contracts are completed. Part of the reduction in demand reflects improved management of rolling stock using computer-based methods.
A survey of Georgia purchasing agents conducted in late January and early February indicates little tendency to restock. The same level of raw material inventories was reported by 90 percent, while the remainder reported larger inventories. Finished goods inventories were stable for a large majority, while some noted growth in stocks. There is little evidence of capacity tightness, as order backlogs are reported constant or shrinking by all but 8 percent. However, lead times allowed on purchases have lengthened slightly for the second consecutive month, while some agents report slower deliveries of goods purchased.
An insurance company reports that delinquencies on its mortgage portfolio continue to run at record levels. However, an essentially stable rate during the past three months brought the rate in January down from the peak level of January 1975. This is only the second decline on a year-to-year basis in the past seventeen months; most months during this period have produced substantial increases.
In the agricultural sector, developments are mixed. Prospects for soybean producers are dimmed by steady price declines, growing imports of vegetable oil, and the likelihood of increasing soybean acreage in Brazil. A substantial shift of acreage to cotton production is expected to result. Rice farmers presently face reduced prices and excessive supplies as a result of less restrictive Government-support programs and reduced distribution of supplies under aid programs. The juice yield of Florida's orange crop has been cut somewhat by adverse weather conditions. Despite these less favorable aspects, cattle producers are looking forward to firming prices and better financial returns, although recent increases in the number of cattle moving to market have lowered prices. This development probably reflects changes in cattle-grading procedures. Federal Land Bank personnel in Georgia report brisk loan demand and steady or increasing agricultural land prices.