March 13, 1984
No slowdown is apparent in recent reports on sales and employment. In fact, employment in most regionally important industries is increasing. Consumer spending continues to grow at a healthy pace, although cold weather adversely affected some localities. Bank loan demand softened in late February. Mortgage lending at thrifts remains strong; deposit growth, although modest, is better than usual for the period. Single-family residential construction and sales continue to rise, but excess capacity has slowed multifamily building. Although cold weather reduced vacation travel to Florida, convention travel is improving. Credit problems have yet to diminish for a large portion of southeastern farmers.
Employment and Industry
Sustained growth in auto and housing sales has stimulated the paper
and carpet industries: packaging used in making a car requires 200
pounds of paper; that used in building a house amounts to 1,000
pounds. The American Paper Institute predicts record production in
1984. The South produces about 50 percent of the nation's paper.
Industry spokesmen expect the boom in carpet sales to continue.
Manufacturers are satisfied with current levels of inventories and
do not foresee substantial price increases during the year.
The phosphate and farm chemical industries are expanding production in anticipation of an increase in farm acreage this year. Projected growth in phosphate fertilizer consumption ranges from 14 to 20 percent. Mines in Florida, the nation's largest phosphate producer, already are recalling laid-off workers. Louisiana's farm chemical companies, which produce 40 percent of the nation's ammonia-a primary ingredient in fertilizer and pesticides-are adding staff selectively. These reports suggest a continuation of the improvement reflected in labor market statistics for January, when unemployment rate fell in three of the six District states and the regional average dropped to 8.6 percent, seasonally adjusted. However, steadily declining rig counts portend renewed weakness in the oil and gas industry.
Consumer Spending
Retailers report February sales rose by healthier-than-expected
margins. Their comments indicate that double-digit increases in
January taxable sale are continuing. Sales promotions introduced
during the President's Day holiday stimulated traffic and sales in
areas not adversely affected by weather. Men's and women's apparel,
appliances, and other home furnishings were the most popular items.
New car sales in January and February maintained the high growth
rates achieved In 1983. However, contacts from such diverse retail
sectors as restaurants, clothing, furniture rentals, auto
dealerships, and discount stores report increased prices or
shortages and delays for intermediate goods.
Construction
Transfers and trade-ups by present homeowners account for strong
sales of single-family homes. Area lenders report that capped
adjustable-rate mortgages recalculated yearly have become the major
financial planning tool. Continuing strength in sales augurs well
for the substantial growth in single-family permits issued during
January. However, home purchases by former apartment tenants are
exacerbating problems of excess supply in multifamily construction,
permits for which dropped sharply in four states. The Department of
Housing and Urban Development has issued a moratorium on new
multifamily housing insurance in southern Mississippi. Commercial
construction and absorption are proceeding at a healthy pace in
Nashville and Tampa. However, Atlanta's nonresidential markets have
softened because of large supplies.
Financial Services
Demand for business, real estate, and consumer loans decelerated
after strong growth in early February. Mortgage applications at S&Ls
in early March are continuing at high levels. Contacts at
southeastern banks and S&Ls say deposit inflows range from flat to
good into early March. This is a sign of strength, since deposits
normally decline in January and February.
The Georgia legislature enacted the Southeast's first regional banking legislation. The law will allow banks and bank holding companies, but not thrifts, to merge with and acquire other institutions in states with similar legislation; it does not sanction interstate branching. Meanwhile, Georgia's Attorney General has challenged the legality of remittance processing centers, or corporate lock boxes, operated in Atlanta by several out-of-state banks.
Tourism
Contacts report substantial improvements in convention business in
Jacksonville, Atlanta, Mobile, Orlando, and Nashville in early 1983.
However, projected occupancy rates for Mardi Gras were a less-than-
normal 80-85 percent because of New Orleans' greatly expanded supply
of hotel rooms. Vacation travel to Florida is below year-earlier
levels. Sources attribute the decline to cold weather, the high
foreign exchange rate of the dollar (which discourages foreign
travel to the United States and encourages American travel abroad),
and the sharp growth in visitors last year. Atlanta had a two
percent drop in airline-passenger volume in January because of
cutbacks in discount fares, and data from major trunk line servicing
Atlanta portend a repetition of this decline in February.
Agriculture
Financial distress is no better than a year ago. Georgia and Florida
maintain Farmers Home Administration (FmHA) loan delinquency rates
in excess of 50 percent, among the highest in the nation. Florida's
delinquencies represent only 4 percent of the state's farmers, but
Georgia's are 10 percent. Mississippi, where one-fourth of the
state's farmers are FmHA customers, also is experiencing
considerable financial difficulty.
A freeze in early March, accompanied by high winds, inflicted additional damage on Florida's agriculture. Damage was less widespread than in December, although some vegetable crops suffered heavy losses. As much as 50 percent of the early corn crop perished.