August 6, 1984
The Sixth District economy slowed somewhat in midsummer, but areas of strength continue to dominate the weaker sectors. Slowing housing construction throughout the region has led to a softening of activity in concomitant industries. Foreign imports are pressuring apparel and textile producers, and the bankruptcy of a Florida-based airline has added to unemployment rolls. In contrast, consumer spending has been strong and bank loans to consumers have grown briskly. Auto dealers report inadequate inventories to meet strong demand. Tourism is outpacing that of last summer, and increasing rainfall has brightened the production outlook for most crops.
Employment and Industry
Labor market conditions have been mixed since the last reporting
period. In June, jobless rates rose incrementally in two District
states and remained unchanged in two others. Only Louisiana posted a
significant decline, from 9.1 percent in May to 8.6 percent in June.
The state's petrochemical industry is gaining strength and some
plants are approaching full capacity utilization rates. Auto parts
plants continued to recall workers to accommodate orders generated
by surging new car sales. A large auto glass facility in Tennessee
recently fired up its third production furnace, which had been idle
four years. Tire-producing plants continue to be hard pressed to
meet demand of auto manufacturers.
Contacts at apparel and textile firms throughout the region are expressing increasing concern over rising imports. Imports reached the highest level on record in May, and industry spokesmen see little hope of a downturn in the near term in spite of efforts to make domestic plants more competitive. Aluminum production is decreasing in Tennessee and spokesmen state that further capacity cutbacks could occur. Inventories of aluminum are building due in part to a slackening of demand from the housing industry. Lumber mills also report increasing inventory accumulations in response to the housing slowdown. Florida's impressive recovery suffered a setback with the bankruptcy of a major Miami-based airline and the resulting addition of 1,200 people to the state's unemployment rolls.
Consumer Spending
District retailers posted healthy sales increases in the first days
of July, but they failed to match the strong double-digit increases
of June. Regional department store sales continue to outpace
comparable sales nationally. Electronic items such as personal
computers and telephones were top sellers. Representatives from
District automobile dealers confirmed that the 1984 auto sales
recovery has continued well into July. District car dealers reported
strong June/July sales despite widespread domestic car shortages and
concerns for rising interest rates. Inventories of full- and
intermediate-sized models are especially low, but dealers forecast
moderate to strong sales for the remainder of 1984.
Construction
Southeastern home builders report a continued slowing in home
construction. Mortgage loan applications have dropped in most
states, and realtors observe increasing inventories of homes.
Building materials suppliers also report continuing declines in sale
and falling lumber prices. Mississippi posted the only significant
growth in residential building permits issued among District states,
while Georgia and Tennessee led the southeastern decline with 9- and
10-percent decreases, respectively.
By the end of August, recent federal legislation will provide bond- funded mortgage loans in District states as much as 4 percent below market rates. This should aid construction of low- and moderate- priced housing in certain areas. Even so, builders expect a continuing decline in residential construction in major southeastern cities, where purchasers may have difficulty in qualifying for these subsidized loans.
Commercial construction in Atlanta, Orlando, and Tampa continues its strong pace. Hotel construction is very active in the Orlando area despite concerns of overbuilding in the face of attendance declines at local tourist attractions.
Financial Services
All major types of bank loam increased in June, and preliminary data
show growth continuing through mid-July. Consumer lending doubled
its growth rate over May; and business credit likewise showed
considerable strength. Although loans at regional savings and loan
associations are running ahead of the level in May of 1983, mortgage
originations have slowed sharply over the last two months.
Bank deposits have registered little growth since May, and thrifts in the region have also posted slow or negative deposit growth.
Tourism
All southeastern visitor centers are experiencing growth in the
number of registrations when compared to last year. Lodging tax
receipts and air traffic figures also indicate increased travel
activity. Air traffic is up in almost all southeastern cities.
Neighboring states are continuing to benefit from increased tourist
travel to the New Orleans World's Fair although, total fair
attendance lags well behind expected levels.
Agriculture
Increased rainfall in recent weeks has improved crop conditions in
much of the Sixth District, but spots in Mississippi and Alabama
remain seriously dry. The extended dry period in June reduced corn
yields in Georgia and Alabama, but adequate moisture during the
balance of the growing season will restore the production of most
other crops.
Farmers Home Administration (FmHA) delinquency rates continue to climb in the District. The present rate is a record high 42 percent, representing 21,000 southeastern farmers. Farmers in Georgia and Mississippi are experiencing the most difficulty, accounting for 10,000, or nearly half of total delinquencies.