November 2, 1983
The southeastern economy is showing renewed strength. Labor markets in most areas and industries continue to strengthen. Demand for durable and nondurable manufactured goods is increasing. Retail sales in autumn appear to be sustaining the momentum attained in late summer, and merchants foresee an excellent holiday season. Housing sales, aided by easing mortgage rates, pent-up demand, enhanced variable-rate mortgages, and government bonds, have revived somewhat after slowing in August and September. Deposit growth accelerated in September after rising modestly during the summer, and but the rate of increase in loans, particularly to businesses slowed substantially after several months of healthy growth. Consumer lending, however, continued to expand. The tourist trade overall remains ahead of last year, but South Florida, middle and east Tennessee, and New Orleans have yet to enjoy significant improvement. Drought and reduced acreage have cut farm production and sharply curtailed business volume for farm-related businesses, but most farmers should fare better than in 1982 because of the Payment-in-Kind (PIK) program.
Employment and Industry
Employment is rising in a variety of industries, and jobless rates
have fallen significantly in most states. After a long period of
weakness, Florida's phosphate industry is recalling furloughed
workers in response to apparent stockpiling by farmers who
anticipate fertilizer shortages because of sharply increased crop
plantings next year. Textile employment has been growing by a
moderate but steady pace, and hours and earnings in the industry are
up sharply from last year. Carpet shipments from Georgia mills have
been quite strong. These trends portend further declines in
Georgia's unemployment. Alabama respondents expecting recovery to
stimulate the coal industry, believe that many closed mines will
reopen soon. Huntsville's high-technology manufacturing base is
expanding rapidly: two computer companies plan to hire a total of
1,500 workers in the near future. Automobile assembly plants in
Georgia are recalling workers, and two new auto parts plants will
soon open in Tennessee. The aluminum industry's resurgence has
sparked demand for refining and smelting products, thereby
stimulating Louisiana's chemical industry.
Consumer Spending
Consumer spending appears to be maintaining the growth evidenced by
August taxable sales, which were more than 10 percent ahead of
August 1982. According to many retailers, September and early
October sales exceeded last year's levels and surpassed many
retailers' projections. Moreover, unlike last year, promotional
sales are playing a negligible role in current activity. Some
merchants in Atlanta and north Florida report strong sales and
increased profit margins on appliances and electronics items.
However, most retailers indicate that the strong showing of fall
clothing and back-to-school merchandise accounts for much of the
recent surge in sales. Merchants anticipate an excellent holiday
season. Despite the reported scarcity of new vehicles at
dealerships, recent car sales figures continue to exceed 1982
levels.
Construction
Housing sales, which fell in August when conventional mortgage rates
approached 14 percent, rose modestly in September. Easing of
conventional rates and stability. in the EHA/VA rate helped rekindle
sates. Realtors cite pent-up demand and buyer adjustment to higher
interest rates as other factors in the quick revival of housing
sales. Adjustable rate mortgages (ARMs) are becoming more popular
because many potential purchasers are unable to qualify for
conventional loans at the current rate and since lenders have
incorporated rate ceilings into ARMs, thereby reducing the risk to
buyers. In Knoxville, Miami, and Mobile, ARM s have recently
outpaced conventional loans, according to several realtors surveyed.
Home buyers in Alabama and Knox County, Tennessee, have been aided
by special issues of local government bonds from which proceeds were
dedicated to financing housing. Florida recently announced a similar
measure to assist Jacksonville residents.
Commercial construction is on the rise for the third consecutive month. Nashville and Atlanta lead the Southeast in the development of new commercial projects. Realtors in those cities expect a continued strong economy to facilitate corporate relocations and prevent a potential glut of office space.
Financial Services
After growing slowly in July and August, deposits at thrifts and
large banks escalated sharply in September. Large denomination, or
jumbo, savings accounts of more than $100,000 sustained the strong
performance of August and, with 2 1/2-year small savers
certificates, accounted for most of the growth in savings capital at
S&Ls. Time deposits and jumbo CDs contributed the largest shares to
September's deposit gains at banks. In contrast, loan activity at
large southeastern banks slowed significantly in September after
advancing throughout the summer. Business lending, which failed to
register a gain from August to September, was the primary source of
this deceleration. However, consumer lending increased in September
for the seventh consecutive month.
A money center bank is backing Florida legislation to allow out-of- state financial institutions to establish de novo operations in the state, thereby permitting out-of-state banks to enter the market without acquiring existing institutions. The proposal is a response to a legislative initiative by Florida bankers to limit out-of-state banking to institutions from regional states with similar reciprocal agreements.
Tourism
The industry is entering its traditionally slow fall season after a
summer that proved to be generally positive, except in south
Florida, middle and east Tennessee, and New Orleans. Hotels and
motels increased revenues in August even though occupancy levels
were below comparable 1982 levels in many District cities. Hotel
construction in central Florida and the apparently rapid absorption
of expensive resort properties along Florida's north Atlantic coast
augur continued growth in these areas. Attendance at most national
park facilities and many private facilities also rose in the late
summer relative to last year's figures; early fall attendance at
private attractions that have added new exhibits, rides, or
facilities is up over year-ago levels. However, heavy rains in
August reduced visitation to state parks 5.7 percent below August
1982 levels, and industry representatives indicate that fewer people
visited many older Florida and Tennessee attractions than last year.
Air travel continues to strengthen from 1982 levels at most of the region's airports. Moreover, service to smaller cities continues to expand. Convention trade is reportedly rising compared to last year in New Orleans. The planned opening of more than 12 non-chain restaurants in the city during the remainder of 1983 betokens great confidence in the future of its tourism and leisure industry. The expansion and upgrading of a major hotel in Nashville should boost convention traffic after a sluggish summer, but contacts there expect little substantial improvement until 1984. In Miami Beach, increased business travel has helped offset the effects of fewer convention delegates.
Agriculture
As a result of drought and idled acreage, revenue from major crops
this year is projected to be $5.2 billion, or 7 percent less than in
1982. The impact of the PIK program, however, should result in a 23
percent ($307 million) increase in net revenue above operating
costs. District soybean production has fallen 42 percent from 1982
levels, but higher prices are likely to generate a 3 percent ($17
million) gain in net revenue above operating costs. Soybeans are the
prime cash income crop in the Southeast. Most other regionally
significant crops suffered similar drought-related productivity
declines, and farm-related businesses are experiencing severe losses
in volume and income. Producers of peanuts and tobacco, two
important crops not covered by the PIK program, sustained especially
heavy income losses because of drought.