Beige Book Report: Atlanta
March 11, 1980
Retail sales continued to expand, especially for energy-saving items. Small car purchases led the advance in automobile sales. Soaring mortgage interest rates hampered home sales. The recent surge in interest rates further crimped consumer and commercial loan demand. An increasingly comprehensive ban on exports to Russia will have significant repercussions on Florida's phosphate industry. Overall, the freeze damage to fruit and vegetable crops appeared to be moderate.
Retail sales persisted at high levels on the strength of both durables and nondurables. Executives of two Atlanta area department stores observed brisk sales. And an official of a retailing chain said that, since the beginning of the year, business has been good throughout the District. Large department stores appear to be doing well, while smaller stores and specialty shops are holding their own. Several contacts noted a drop in impulse buying as evidence by a sizable reduction in returned items.
An Atlanta-based conglomerate involved in the manufacture and sale of various consumer goods noticed abrupt gains for some energy-saving items. Bicycle and motorcycle sales jumped dramatically. Also, sales of billiard tables and bowling balls were up sharply as people looked closer to home for entertainment.
Automobile sales turned up, largely on the strength of small car purchases. Foreign car dealers experienced excellent sales; however, slow deliveries held these sales below potential. Sales advanced for the Chevrolet and Ford dealers contacted in Knoxville. In the Atlanta area, an AMC dealer reported very good volume and a Chevrolet dealer reported steady sales, while Ford dealers said business improved due to rebates. Inventories of domestic automobiles were considered adequate, but some dealers expressed concern about the availability of enough compact cars to compete with foreign imports. Most dealers do not view high interest rates as significantly hampering automobile sales.
The outlook for production at Atlanta's two GM assembly plants is mixed. After a three-month layoff, about 2,200 second shift employees at the Doraville plant returned to work in late February. The recall was primarily attributable to brisk sales of the Oldsmobile Cutlass, one of several intermediate models assembled there. On the other hand, 900 truck assembly workers at the Lakewood plant will be furloughed during the middle of March, ending that plant's production of pickup trucks for the remainder of the 1980 model year. The second shift of truck assembly workers was placed on indefinite layoff in early December.
Despite high interest rates, demand for homes remained relatively steady, supported in some areas by employment transfers. Nonetheless, overall sales of new and existing homes were soft. Soaring interest costs are expected to preclude all but upper income families from qualifying for even moderate mortgage loans. A survey of eight building supply firms in eastern Tennessee found inventories about the same as year-ago levels, with cutbacks in residential sales balanced by advances in nonresidential sales and home improvements. Mortgage loan applications in the same area were down 75 percent from a year ago. An FHLB official in Atlanta observed that commitments fell markedly, savings inflows contracted, and S&Ls borrowed heavily from the FHLB.
Accelerating interest rates dampened consumer and business loan demand. An economist for one large Georgia bank reported that loan demand was slack. Also, banking contacts in several parts of the District observed a recent downturn in loan requests. One reported nearly all loan requests coming before the committee were for smaller size credit renewals up to $50,000. Many customers incurred penalties on long-term certificates to purchase money market instruments. More emphasis is being placed on variable rate loans by bankers at numerous institutions.
The U.S. Government's recent ban, for an indefinite period, on phosphate exports to the Soviet Union is expected to significantly disrupt Florida's phosphate industry. A $1 billion per year contract between Occidental Petroleum and the Soviet Union was canceled. This agreement involved the shipment of phosphate, mostly from Florida, to Russia in exchange for other fertilizer products. A temporary glut is anticipated, but eventually the surplus will be eliminated because world phosphate demand exceeds available supply.
Florida's citrus crop escaped major damage from freezing temperatures during the first days of March. However, a reduction in next year's crop is likely due to the blackening of blooms that had already emerged. Damage to the peach crop was estimated as high as 30 percent of this season's crop. The frozen blooms on earlier varieties cannot bear fruit. Cold weather extended into Southern Florida and, therefore, affected vegetable growers throughout the state. Although some individual growers incurred sizable losses, the overall impact was not considerable.