July 14, 1976
The southeast's economic recovery continues, led by consumer spending, tourism, and some agricultural industries. A number of directors perceive a recent leveling tendency but retain a positive view of future prospects. None doubt that current progress will continue, although it may be slow. Retail sales gains tapered off in some parts of the region but have resumed in many areas. Tourist outlays remain a key area of strength. Bright spots are numerous in southeastern agriculture. Industrial developments present a mixed pattern. Purchasing agents report moderating economic growth. Improvement is becoming more evident in the District's construction industry.
Despite some recent slackening, consumer expenditures continue to supply the driving force behind the southeast's recovery. Marked gains persist in motor vehicle sales; smaller models remain an exception. Dealers cite holder-in-due-course regulations as a source of increased contingent liabilities; purchased paper contracts increasingly provide full recourse to the dealer. Used car sales are strong, although independent dealers report a scarcity of customer financing. Reports from Birmingham indicate a continuation from May into June of weakness in soft goods sales. Price reductions late in the month alleviated this weakness. New Orleans area merchants also used earlier-than-usual price cuts to revive sales. In both localities, customers responded well to these price concessions. Reports from numerous small variety stores in Alabama and Mississippi also indicate recent slowness in sales. Reports from Florida indicate slowness during May in some localities follow by gains in late June, while others have enjoyed uninterrupted increases. Some Nashville retailers report sluggishness in retail sales, while slow, steady gains are noted by others. Several cases of excessive inventory accumulation are mentioned, as well as an "industry-wide problem" with charge account collections.
Tourist expenditures remain a mainstay of the District recovery. Tennessee leads in strength, with large gains in attendance at national parks and private recreational attractions. Opryland continues to enjoy huge increases in attendance from last year; the Grand Ole' Opry is continually sold out. New Orleans reports large gains in hotel and motel receipts. Tourist traffic in central and southern Florida is generally very strong, although one source in southern Florida cites a slight letdown in June. This report is echoed in northeastern Florida, where declines in tourist patronage were recorded in June.
Food industries are another area of strength in the District. The shrimp fishing and processing industries in Louisiana are benefiting from greatly increased catches and rising prices. They should have a banner year. The sugarcane industry anticipates higher yields on a smaller acreage due to unusually favorable weather conditions. Weather has proved detrimental to cotton yields in Alabama, Tennessee, Louisiana, and Mississippi. However, markedly higher prices will offset the impact on producers to some degree. Corn production is expected to be large in Alabama, Tennessee, and Louisiana. Crop progress in soybeans is good in Alabama, Mississippi, and Tennessee. Florida reports that the citrus industry is prospering. The price of Valencia oranges has risen significantly. Recent miscalculations of orange juice concentrate inventory levels do not seem to have affected sales volume or the price of orange juice.
Various industry developments include an aluminum plant operating at maximum capacity which cannot meet the demand for its product. Demand has been boosted by the Canadian aluminum strike. Rubber production in Alabama remains dormant, pending settlement of the United Rubber Workers' strike. Appliance output has increased as a result of progress in home construction. A large steel company is experiencing increased sales; production increases have stimulated rehiring. A machine tools producer notes increased inquiries for pricing, although actual orders remain slow. This company's present backlog results in a 6- to 12-month lead time for new orders. Farm equipment is selling very poorly, with the exception of harvesting machinery.
A survey of Georgia purchasing agents indicates moderating economic growth. Increased sales and production are much less prevalent than in prior months. Further leveling of business activity in the next three months is anticipated. Delivery periods for purchases are stabilizing; slower deliveries are less frequently noted, while unchanged delivery times are increasingly prevalent. Average lead times on orders placed are somewhat shorter. A moderating tendency in prices is also apparent; reports noting price increases predominate but are offset to a much greater extent by constant or lower prices. Expected price increases have also eased somewhat. Growth in order backlogs has also moderated substantially. Inventory additions are decelerating for raw materials and finished goods; this tendency is expected to continue for raw materials.
Even the hard-pressed construction industry is showing definite signs of revival. Increased activity is general in single-family home construction. Sales of homes are increasing and prices appear to be firming in some areas. In southern Florida, the number of foreclosures has decreased substantially. Some signs of interest in condominium projects have been reported; these take the form of building permits and purchases of uncompleted projects. However, vacancy rates and inventories remain extremely high in some areas despite substantial reductions. Nevertheless, in the judgment of one director, "A turnaround is in the making" and southern Florida is "going through a moderate but firm recovery."