July 5, 1979
In the past few weeks, the two most significant factors affecting the southeastern economy were gasoline availability problems and the nation's independent truckers' strike. Despite some trouble spots, District gas supplies appear to be holding up better than in the nation at large. The truckers' strike caused serious disruptions and hardships for the District's agricultural sector and exacerbated gasoline supply problems. Consumer spending has been sluggish and many retailers have expressed increased uncertainty regarding future sales and inventory levels. Some slowdown in single-family residential construction has been discernible, except in Florida and the Atlanta metropolitan area. Banking contacts expressed concern over the ability of higher interest rates on savings to attract new money. Loan demand, except for home loans, has remained strong. Commercial construction and industrial activity have been healthy.
The independent truckers' strike had a severe impact on the District's agricultural sector. Many farmers were unable to secure the delivery of excellent harvests to market. Alabama's corn, potato, and bean growers, as well as south Georgia's and Florida's watermelon growers, experienced substantial losses. Large poultry losses throughout the District were also incurred because of the necessity to destroy chicks and eggs. Additionally, layoffs and reduced payrolls occurred in food processing industries. An estimate of the strike's full impact is, at present, somewhat conjectural; however, it is certain that convoys escorted by the National Guard or the state police mitigated delivery problems and prevented wholesale disaster for some farmers.
The strike and actual or threatened violence to nonstriking truckers worsened existing gasoline supply problems. The areas reportedly experiencing the most critical availability problems and the longest gasoline lines were northern Alabama and southern Florida. Gasoline availability in Georgia and Tennessee has remained generally adequate, helped by a reduction in the tourist traffic. Purchase limits and reduced station hours are now the rule throughout the District, but odd-even rationing has been effected only in south Florida.
Although passenger travel by plane and train has increased dramatically, the gasoline situation has cut so deeply into auto travel that total tourism has dropped rather sharply. In late June, tourism in Florida was reported to be down 10 percent.
The overall attitude of contacts regarding consumer spending is increasingly one of caution and uncertainty. Although some retailers have reported increases commensurate with inflation, most reported sluggish sales. Inventories have been held to manageable, albeit slightly higher than desired, levels. Ordering policies have been adjusted to the uncertain outlook: one major retailer is making smaller, more frequent buying trips; another is keeping cancellation options open. Automobile sales also have been flat or declining. The previously reported inventory imbalance still exists; namely, an abundant supply of new and used large automobiles and a critical shortage of smaller, fuel-efficient cars. The Atlanta area Ford LTD plant was again closed for two consecutive weeks.
A continuing slowdown in single-family housing construction has been evident in many areas of the District, except Florida and Atlanta where a steady influx of new businesses continued. Sales of existing homes are still considered strong. However, realtors in Nashville, southern Mississippi, and Louisiana reported a tempering of demand by high mortgage rates. Because of anticipated price rises, build- ups of inventories of building supplies, particularly concrete products, have occurred in certain areas. Commercial construction continues to be fairly strong. Various office buildings, hospitals, etc., are under construction throughout the District, and a major redevelopment of Tampa's central business district is now under way.
Districtwide, consumer and business loan demand have remained strong. However, most banking contacts report that deposit growth has not been keeping pace with loan growth. Many bankers are concerned about extremely low personal savings rates and skeptical that the higher rates for passbook accounts and certificates will attract much new money. The net effect, in their opinion, will be a higher cost of funds with minimal deposit growth. The lifting of the usury ceiling in Tennessee, as expected, provided new investment funds, particularly for shopping centers and office buildings.
Industrial activity has continued at a healthy pace. Several corporations announced plans or began construction on new plants or expansions to existing facilities. A new newsprint plant that recycles newspapers as its main raw material began operations in Dublin, Georgia, during May. Construction of an offshore superport in Louisiana began and is expected to produce 35,000 jobs when satellite industries are established. The most significant development in the District was the commencement of the Kings Bay Navy Base project along the southern coast of Georgia near the Florida border. This project is expected to provide employment for 60,000 in the local economy and $200 million in construction.