December 5, 1984
Strengths continue to outweigh weaknesses in the southeastern economy. With the exception of certain import-sensitive industries, the manufacturing sector continue to expand, and optimism remains strong. Retailers expect healthy holiday sale without excessive pressures on profits. The large volume of commercial construction is helping to offset the slower pace of residential building, and contacts believe that underlying conditions portend a revival in housing next year. Bank loan demand remains on the upswing, and thrift mortgage commitments are above the seasonal norm. Business and convention travel is sustaining growth in lodgings and air transportation, although vacation travel has slowed somewhat. The agriculture sector, particularly cotton and soybean growers, also experienced some late-season setbacks as the result of heavy rainfall and flooding.
Employment and Industry
Unemployment rates changed marginally in September. However, more
recent labor market data for three of the six District states
suggest that the region's overall rate rose slightly in October.
Industrial activity also is mixed. Fewer housing starts and rising
Imports of Canadian lumber are swelling forest product supplies and
depressing prices. One-third of the lumber now sold in Alabama
reportedly is Canadian. Clothing and textile producers continue to
face stiff foreign competition that has resulted in layoffs and
plant closings.
Although previously idled workers in Louisiana's petrochemical industry are being recalled, the industry remains weak. However, respondents anticipate chemical production to grow from current depressed levels if interest rates stabilize or fall further over the next quarter since demand for the state's chemical products stems largely from the credit-sensitive auto and construction industries. Drilling activity in south Louisiana continues its gradual upward trend. Over 39 percent of rigs are now working compared to 68 percent a year ago. The region's many paper mills are operating near capacity. Industry spokesmen fear that packaging- related orders may slow as the economy cools, but they foresee ongoing strong demand for computer paper and other forms. Defense and space programs are providing additional stimulus. A satellite assembly facility and a cruise missile plant recently began operating In Florida. A major Mississippi defense contractor expects to add 1,500 workers to its payrolls by spring as naval shipbuilding and refurbishing contracts reach the assembly stage.
Consumer Spending
Southeastern retailers report varied sales gains ranging from 2 to
10 percent for October and November. Mild fall temperatures slowed
consumer spending and contributed to the accumulation of unwanted
inventories in a few areas. However, generally steady retail sales
and increased advertising and sales promotions helped keep
inventories at desired levels elsewhere. Electronic items and toys
were best sellers in the October-November period. Sales of winter
apparel items, especially outerwear, also spurted in November with
the onset of cooler weather. Retailers report that prices for
Thanksgiving weekend were at "regular discount levels." Although
some retailers have lowered their expectations for consumer
spending, most expect good Christmas season sales without the need
for extreme price discounts to move inventory.
Shortages of certain popular models and strike-related sales declines slowed car sales activity in October and the first two weeks of November, but regional auto sales remain sharply ahead of 1983 on a year-to-date basis. Southeastern dealers expect new car sales to continue strong through the first half of 1985.
Construction
Many builders and real estate agents polled believe that declining
interest rates, stable home prices, and increasing personal income
augur a rebound in housing in 1985 from the current moderated level
of residential construction. Commercial real estate construction
continues at a record pace in most major southeastern cities, but
vacancy rates are generally high. Miami's vacancy rate edged down to
13 percent, though. Shopping center construction has increased in
Birmingham and Miami with the entry of major retailing chains into
those markets.
Financial Services
Loan activity remained strong in October. Consumer and business
lending accelerated from the growth rate of previous mouths. The
pace of real estate lending at banks slackened in October, but
mortgage commitments at savings and loan institutions currently are
above the level expected for this time of year, according to thrift
officers surveyed. They report that the higher qualifying standards
for customer income recently enacted by mortgage insurance companies
has not noticeably dampened consumer demand for mortgages.
Tourism Vacation tourism slowed somewhat in October, but business and convention travel remains strong. Attendance at many southeastern attractions decreased relative to year-earlier levels. For the first time since the beginning of the year, Florida welcome centers registered fewer visitors. However, hotels and motels increased revenues in October due to increased occupancy and steady room rates in most markets. Miami's convention bookings were 20 percent ahead of year-ago levels. Most regional airports, which, like hotels, serve primarily business and convention travelers, had higher passenger volume than in October 1983.
Agriculture
Late season weather has changed crop prospects. As a result of
extensive rainfall and flooding, Mississippi's estimated cotton
yield declined 115 pounds per acre, occasioning a 17 percent revenue
loss from earlier projections. Rains and floods also proved damaging
to the soybean crop in Louisiana and Mississippi. Production
declines in those states, added to earlier drought-induced losses in
Georgia, may reduce revenue to southeastern soybean farmers by 9
percent, or $139 million, from 1983's relatively low level.