Beige Book Report: Atlanta
June 23, 1987
The Southeast continues to show moderately increasing employment and falling unemployment rates, even in Louisiana and Mississippi where rates have been in double digits. Manufacturing employment has been increasing, especially in textiles. Construction of office buildings and homes has slowed, although warehouse and industrial construction is still strong. Production of oil and gas seems to have bottomed out.
Employment and Industry
The employment picture improved moderately in the region for the
latest reporting period. Notably, the unemployment rate in Louisiana
fell by over one percentage point from March to April, and total
employment expanded. Transportation equipment employment increased
in the state due to more activity in ship building and repair.
Increased activity in the lumber and wood sector also accounted for
some of the state's employment gains. The employment declines in the
energy-producing sector appear to have bottomed out.
District chemical producers supplying the apparel and textile industry have been prospering as a result of the rebound in textiles. The tire industry is strong as a result of lower prices for petrochemical raw products and growing demand attributable to increased auto travel. Food manufacturing is getting a strong lift from the expansion in poultry and fish processing industries. Spokesmen from the furniture manufacturing industry are optimistic, at least for the near term. The machinery industry, however, suffers from excess capacity and weak demand.
Consumer Spending
During May, southeastern retailers generally posted slight increases
over last May's sales. While overall sales fulfilled merchants'
expectations, activity continued to be sluggish in Mississippi and
Louisiana. Retailers do not plan to increase inventory levels in
anticipation of higher prices, and they seem content with their
present inventory as they head into the summer months. Although
profit margins on foreign goods are decreasing for some, retailers
generally have not yet raised prices on imported merchandise.
Car sales in the District were disappointing in May as major U.S. and Japanese manufacturers posted sharp declines in sales from levels a year earlier. Dealers' hopes for the traditionally strong pre-summer months were dashed despite attractive car-maker incentive programs to lure new buyers. Meanwhile, minivan, utility vehicle, and light truck sales are still growing.
Construction
Single-family building permits held steady in April for the Sixth
District and the nation (three-month average, seasonally adjusted).
Contacts in Birmingham, Atlanta, and Nashville report an oversupply
of homes priced over $200,000 but note that the sale of medium-
priced homes is still strong. Additions and renovations to existing
buildings make up the bulk of construction in New Orleans. The
mortgage rate increase has dampened sales and led to closing delays,
say realtors.
Orlando builders report a decrease in office vacancy rates, although contacts in Atlanta and Birmingham say the construction pace has yet to slow enough to see significant rate declines. Office vacancy rates in the central business districts of Ft. Lauderdale and Memphis rank among the nation's highest. Contacts say the concentration of new office space in the suburbs of these cities is largely to blame.
District builders are more optimistic about development of industrial distribution and warehouse space. Atlanta's strong absorption rate has spurred assemblage of large land tracts for industrial development despite falling rental rates. Orlando contacts expect strong demand this year and steadily declining vacancy rates.
Financial Services
Total loan growth at the District's larger commercial banks edged
downward in April, caused largely by a steep drop in the growth rate
of consumer loans. Contacts speculate that reductions in outstanding
credit card debt, along with weak auto sales and uncertainty about
the economy, may have dampened consumer lending growth this year.
Tourism and Port Activity
With visitor registration in May up strongly from last year, there
are expectations throughout the Southeast of a strong summer season
for tourism. Cities throughout the District are posting increases in
air travel well above the national average, which is partially a
result of more airlines selecting southern cities as hubs for their
operations.
The lower dollar appears to be slowly fueling export growth in the District. Miami port officials report gradual improvements in exports to Latin America. Even so, exports and total port tonnage were both 10 percent below year-earlier levels for the first seven months of the fiscal year beginning in August 1986. In New Orleans, a rise in exports of pulp and paper and other manufactured products has substantially boosted port employment and revenues. Rebounding foreign sales of phosphates in the first four months this year pushed Tampa's export tonnage up by about 5 percent from the depressed level in the same period last year.
Agriculture, Forestry, and Mining
District oil rig activity remained stable in May for the third
consecutive month. Even so, the number of rigs in operation is still
30 percent below last year's depressed figures. Although two-thirds
of the ocean rigs in the Gulf of Mexico are idle at present, one
source predicts active rig numbers will double by 1988 because of
the improving price outlook. Coal production in Alabama and
Tennessee experienced more than a seasonal decline in April and May;
output fell short of year-ago levels by 12 percent. With higher
prices for petroleum products, demand for coal should improve during
the balance of 1987.
On balance, crop prospects currently appear favorable. There is some concern over low rainfall totals in the eastern half of the District. The poultry industry, suffering from production-induced price declines, is experiencing shrinking profits. Pork and cattle herds are apparently being rebuilt.