March 12, 1985
The southeastern economy continued to expand in early 1985. Employment has increased in several basic manufacturing industries although some other manufacturers remain burdened by competition from imports. Sluggish consumer spending growth accompanied a severe mid-winter cold spell, but sales of new vehicles remain very robust. Housing markets are generally firm while still-booming office, retail and industrial construction shows signs of outpacing high levels of absorption. Business and real estate lending growth corroborates the moderately strong economic advance of the region. Tourism activity measures indicate that current and expected business and convention travel is strong. The agricultural sector continues to be the major soft spot, with prices for some important products falling and those for some others still depressed.
Employment and Industry
Business and labor market conditions generally have improved since
the last reporting period, spurred by continuing growth of defense,
construction, and auto-related industries. However, sluggish
performance of major import-competing and energy industries continue
to burden Alabama, Louisiana, and Mississippi with double-digit
unemployment rates.
The region's tire plants, which have been running near capacity, recently increased their production schedules, and paper manufacturers are adding capacity to meet demand. A major steel producer has recalled 650 employees to its north Alabama plant, including some who have been laid off since 1980. Louisiana's petrochemical industry is producing at high levels for the specialty chemical segment, but the larger agricultural segment is not faring well due to foreign competition and the plight of the farmer. Petroleum refiners continue to trim operations.
Record-breaking trade deficits for apparel and textile products have resulted in mill layoffs throughout the region. Apparel fabric producers have been especially vulnerable to imports. The number of textile jobs declined by 2,000 in Georgia alone in early 1985. Industry spokesmen fear that their heavy domestic investment in productivity-enhancing equipment has not reversed the industry's declining trend. In contrast to other textile sectors, carpet sales are reaching record levels due to a sharp upturn in commercial contract orders. Carpet sales are expected to grow by 10 percent this year based on the office building boom.
Consumer Spending
Excluding autos, regional retail sales, as reported by surveyed
merchants, were generally up from 5 to 8 percent in February
compared to a year earlier. Retailers viewed this sales pace as
sluggish but did not report any strong concerns about high inventory
levels. Cold weather earlier in this reporting period limited
overall shopping but helped to reduce the heavy stock of winter
apparel that accumulated during the unusually mild early-winter
period. Several retailers reported that they were discounting prices
more than usual to spur consumer spending now that pent-up demand
for some items has been met. Continuing strong consumer lending for
new vehicles, particularly in Florida and Georgia, has encouraged
dealers' optimism for another good year despite the mid-winter cold
wave that slowed sales in some areas.
Construction
Single-family residential sales, prices, and construction remain
strong in major southeastern markets, with the notable exception of
New Orleans, where home sales and prices are weak. The region's
multifamily residential market also remains firm amid heavy
construction activity. Absorption of office building space is at
very high levels in most large cities but is not keeping pace with
construction activity. Vacancy rates have increased most noticeably
in Tampa and Miami. High levels of shopping center and industrial
construction activity are outpacing absorption in some large markets
such as Atlanta and Orlando.
Financial Services
Business, real estate, and consumer lending by large banks
accelerated at year-end 1984 and continued to grow in January.
Savings and lean associations' mortgage commitments also showed
renewed strength during this period. Preliminary bank and S&L
information for February suggests some slowing of consumer lending,
with the business and real estate lending trends unchanged.
Tourism
Tourist activity improved with the weather in February, following an
apparent cold weather-related slowdown in January. Moreover, the
near-term outlook is quite bright, especially because business and
convention travel has continued to show healthy growth. A pickup in
vacation travel solidified strong occupancy levels and advance
bookings in Palm Beach, Miami, and Daytona Beach. Convention
bookings in Miami Beach, Mobile, and Knoxville are well ahead of
last year, and air travel rose 12 percent at Atlanta's airport.
Agriculture
Unfavorable prices for most crops and livestock products continue to
squeeze regional farmers' profits. Broiler and cattle prices have
shown some improvement in recent weeks, but egg prices have fallen
about one-fourth as production has increased. Crop prices also
remain depressed, particularly for soybeans and cotton, compared to
year-ago prices. Farmers currently plan to reduce soybean acreage
planted by one-half million acres this year and hold cotton planting
to its 1984 level, but they intend to expand corn plantings.