January 29, 1980
Residential construction continued to falter, but commercial and industrial construction held firm. Retail sales, other than autos, moved downward. The slump in automobile sales abated due to expanding sales of domestic and foreign compacts. Loan demand remained weak. Winter tourism for Florida looks bright. Ethanol production began its ascent, and northern Alabama was chosen as the site for a multibillion dollar coal gasification plant. Gold Kist officials are not optimistic regarding clearance for a massive poultry shipment to Russia.
Retail sales, excluding automobiles, declined, with nominal sales about equal to year-ago levels. A property manager at a large Nashville mall observed normal clearance sales and promotional activity compared to recent years. The majority of his tenants have reduced inventory volumes 10 to 15 percent below last year's level due to an expected lackluster first quarter. He believes an unusually large number of customers reached their credit limits and that credit rejections were higher. A property manager at another Nashville mall reported sales were slower, traffic was less than normal, sales and promotions were greater, and fewer trucks delivered goods. According to its management, a Fort Lauderdale area mall experienced sales levels equal to last year, helped considerably by markdowns.
The downturn in automobile sales appeared to level off. Overall, unit sales were stable. Demand for smaller cars grew more intense and accounted for the bulk of sales. Fuel-efficient domestic autos sold well, and some foreign car dealers described their sales as fantastic. For example, a Honda dealer said sales have taken off, with twice the number of sales compared to last January. A Nashville Chrysler dealer noticed a dramatic rise in sales after Chrysler's Federal loan guarantee was approved, while a Montgomery Chrysler dealer reported a moderate increase. Many dealers observed a sizable increase in consumer loan denials by finance companies. Also, many potential customers who own large cars are not buying because their outstanding loan balances are greater than the value of their rapidly depreciating fuel-inefficient vehicles. Most dealers believe the price of gasoline has become at least as important as availability when purchasing decisions are made by customers.
Single-family residential construction remained weak throughout the District, except in the Mobile area, where rebuilding from Hurricane Frederic's destruction in September created a construction boom. Residential construction was viewed as poor in Jacksonville, off sharply in Baton Rouge, nonexistent in northern Alabama, and at a standstill in central Alabama and southern Mississippi. A south Florida banker reported almost no new construction of lower priced homes favored by younger families.
An appreciable slowdown in sales of existing homes was evident in Birmingham, Nashville, Baton Rouge, and southern Mississippi. However, sales of more expensive homes in most of southern Florida were brisk. Several directors from that area noted a large number of wealthy individuals continued to purchase expensive retirement homes. Also, a notably increased proportion of sales to retirees involved only cash or very large downpayments.
Districtwide, commercial and industrial building provided considerable support to the construction sector. In Jacksonville and Atlanta, contractors enjoyed a backlog of current projects. Heavy construction remained active in Birmingham but at a slower pace vis-a-vis recent months. In southern Mississippi, commercial construction held up fairly well, and it expanded in New Orleans. Industrial construction continued strong in Baton Rouge, where reasonably brisk activity was expected. However, most industry contacts believe few major projects will be undertaken until long-term interest rates subside.
Overall, loan demand continued to sag. A central Florida and a northern Alabama banker reported a substantial drop in loan demand. Weakening loan growth and weak deposit growth were reported by a Jacksonville banker. A south Florida banker commented on a significant downward trend in retail lending due to high interest rates that caused consumers to defer purchases of more expensive items.
The District's emerging alternate fuels industry was bolstered by numerous developments. Construction is expected to begin soon on two alcohol fuel (ethanol) plants in southern Louisiana which will use agricultural biomass to produce over 20 million gallons annually. Plans for building ethanol facilities in Jacksonville and Tampa were disclosed, as were future plans to construct plants in Orlando, Miami, and Pensacola. A Federal grant to support development of ethanol production at a distillery in southeastern Georgia was approved.
The chairman of TVA announced the selection of northern Alabama as the site for the agency's $2-billion coal gasification complex. The northern section of the state was chosen because of its accessibility to Alabama and western Kentucky coal and the demand for gas in the area. An exact site will be decided upon by October 1980. Also, the TVA embarked on large-scale efforts to provide low-priced solar homes within its region and to build the nation's first coal-based fuel cell power plant.
Tourism in Florida is expected to be very good this winter. A contact from the Fort Lauderdale-West Palm Beach area reported reservations well ahead of comparable 1979 figures. Attendance at central Florida attractions is strong, occasionally reaching saturation levels. Hotels and motels there are enjoying near-record occupancy rates. And the Kennedy Space Center is experiencing its best season.
Retaliatory trade restrictions against Russia are likely to produce a major impact on District poultry farmers and Gold Kist, an Atlanta-based agricultural cooperative. A huge shipment of frozen chickens, representing about 2 percent of U. S. annual poultry production, was delayed pending the granting of an export license, an increasingly unlikely prospect, according to a Gold Kist executive.