Beige Book Report: Atlanta
March 23, 1983
Evidence of recovery has become more widespread and consistent since January, and respondents expect this trend to accelerate in most sectors. Previously reported improvements in construction and auto sales are triggering inventory and employment expansion in related industries. Mortgage rates have resumed a downward trend after rising earlier this year. Retail sales growth has tapered somewhat, but many merchants are expanding inventories in anticipation of a resurgence in consumer spending. Savings deposits at banks and thrifts continue to expand although less rapidly, and consumer lending has picked up slightly for the first time in months. The upturn in tourism is extending to more areas and markets. Farm lenders are less pessimistic than when previously polled, even though delinquencies and foreclosures are still mounting.
Employment and Industry
More signs of recovery are appearing in
manufacturing. Local orders for auto parts are rising substantially
in response to increasing auto sales. The upturn in construction is
stimulating lumber yards to rebuild inventories and building
materials manufacturers to recall workers. Even heavy industries are
beginning to report increases in orders and expansion plans. A sharp
drop in Florida's February unemployment rate to the single-digit
level strongly signals the end of recession since Florida's cycle
lags that of other states. Oil, petrochemicals, shipping, and
aluminum remain depressed, however. A survey of Louisiana
petrochemical plants reveals no significant change in production
levels or capacity utilization, but hope remains that lower costs
for petroleum-based raw materials will boost the industry. Reduced
oil prices should also aid Louisiana's Offshore Oil Port, which is
now handling one-third of break-even volume, but they would
adversely affect regional synfuel projects, such as coal
gasification.
Consumer Spending
Retailers report that the upward trend in
consumer spending is continuing but at a slower rate than in
January. They cite atypically mild weather as the reason that the
Southeast fared better than the nation in February. A poll of
regional department store officials indicates that most are building
"heavier-than-usual" stocks of apparel and appliances, which are
moving well. Ordering for most other merchandise, however, remains
cautious. Car dealerships report increased floor traffic this month
and reviving demand, although sales at Ford's regional dealerships
fell almost 5 percent last month from year-ago levels. Because of
customers' recent responses to lower interest rates and falling
gasoline prices, dealers are expanding inventories, particularly of
large models carrying high profit margins.
Construction
A poll of realtors reveals high optimism. March sales
are running even with or above February levels. Most respondents
expect the progressive improvements of the past months to continue.
A survey of building permit departments indicates that applications
appear to be coming in at a faster rate than last month. Even more
depressed cities, such as Birmingham and Chattanooga, are beginning
to report a quickened pace. Conventional mortgage rates continue to
ease after edging back up in January and early February. By mid-
March the rate structure in Atlanta drifted down from early
February's range of 12 to 13 5/8 percent, with most lenders at 13
1/4, to a range of 12 to 13 percent, with most lenders at 12 3/4
percent. Discount points on FHA and VA loans firmed slightly the
second week of March. As many as 6 3/4 points are being charged on
some mortgages.
Finance
Total deposits at large commercial banks fell slightly last
month relative to the previous month for the first time since last
August. However, buoyed by money market deposit accounts (MMDAs),
savings deposits at banks and thrifts continued to grow, albeit more
slowly than the 26-36 percent rates prevalent at year-end.
Commercial banks report continued uncertainty about the maturity of
assets against which to match this new instrument. Investments,
particularly treasuries, are currently favored. Construction and
commercial loans should receive a large portion of these funds once
their stability is determined. Growth in corporate and real estate
loans moderated last month after jumping sharply in January.
Consumer loans grew slowly for the second successive month after a
quarter of decline. District banks are pioneering innovation in
financial services. Next month a bankers' bank, offering
correspondent services to 50 independent banks, will begin business
in Florida. Two southeastern banks have entered a joint venture with
two other financial firms and a major publisher to offer national
financial services, including home banking and cash management,
through a videotex system. A Georgia bank will offer banking,
insurance, and travel agency services in three Atlanta supermarkets
by May.
Tourism
Although improvements in travel and tourism remain
concentrated geographically, reports of nascent recovery come from a
widening arc. For the first time in months, business travel has
begun to pick up, according to industry representatives polled.
EPCOT is filling central Florida hotels to capacity, and bookings
are "solid" through Easter. Even south Florida's hotels are
experiencing rising occupancies relative to last year, but
international tourism remains off. A strike by Eastern Airlines,
Miami's largest private employer, would exacerbate the area's woes.
It might also temporarily reverse the growth in passenger traffic at
Atlanta's Hartsfield Airport, which has finally reported the first
monthly increase from year-ago levels since September 1981. Only in
Tennessee and Louisiana have respondents yet to perceive harbingers
of an upturn. Certain markets, such as family tourism and
conventions, also remain soft.
Agriculture
A survey of farm lenders reveals a continuing climb in
liquidations and bankruptcies relative to a survey taken last fall
and to historical norms. Nonetheless, only a minor portion of the
District's farmers face severe insolvency. Lenders believe less than
10 percent of farmers are undergoing partial liquidation and less
than 3 percent, complete liquidation. Only one-fifth of farm lenders
surveyed anticipate worsening farm financial conditions in the
coming two quarters, whereas last autumn a clear majority expected
deteriorating conditions. Produce prices are rising. Excess rains
have caused a temporary shortfall in shipments of vegetables, and
two years of freezes have reduced yields and raised costs for citrus
growers. However, new duties should prevent foreign producers from
making serious inroads into Florida's orange juice market.
Panel of Economists
Most of the bank, business, and academic
economists polled believe the FOMC's monetary policy is consistent
with the goals of recovery and nonaccelerating inflation, but
business economists regard money supply growth as too rapid for the
continued restraint of inflation. No consensus exists regarding the
optimal monetary aggregate on which to focus attention. The majority
of economists are more optimistic about the strength of national
recovery than they were in January, and state forecasters have made
upward revisions in their predictions of state recovery. However,
most bank economists hold the same views about local recovery as in
January. New signs of regional improvement noticed since our last
survey are in the areas of disinflation, business services, consumer
spending, and housing- and auto-related industry and some light
manufacturing. In addition, more respondents see amelioration in
construction and auto sales. Economists expect consumer durables,
basic manufacturing, and migration to begin reviving in the next
phase of recovery. Most panelists see no signs of rekindling
inflation, but a few discern such a trend in housing and building
supplies.