March 15, 1988
Recent economic activity in most sectors of the southeast has maintained the moderate pace of the previous reporting period. Regional manufacturing continues to expand especially for textiles and paper. The petroleum and coal extraction industries are reviving. Although retailers' sales are not increasing much when compared to last year, inventories are not excessive and auto sales are improving. Loan demand has turned up at commercial banks and tourism has posted healthy gains. The outlook for agriculture is positive thanks in part to government programs. Although commercial construction continues at a low ebb, residential building is improving in some areas.
Employment and Industry
Increasing exports of nondurables continue to bolster the southeast
economy. Textile mills and apparel manufacturers are optimistic that
they will continue to do well in 1988. Several apparel manufacturers
who were shut down a year ago now speak of labor shortages. The
paper industry has been unusually strong, reflecting rapidly
increasing demand from both foreign and domestic sources. Industry
contacts report rising prices and exceptionally low levels of
inventories for pulp and linerboard.
A number of plants in the region's petrochemical industry have announced expansion plans for 1988 and are increasing employment. Foreign sales in that sector have been greatly helped by the decline of the dollar. Oil service manufacturers are expecting a profitable year due to the continuing increase in oil rig activity both on and offshore.
Consumer Spending
Retailers around the District reported moderate or no increases in
February sales over those of last year. Inventories are reported to
be in line with desired levels heading into the spring selling
season, although retailers indicate that they are concerned about
the potential for an unwanted inventory buildup. Retailers are
targeting this season's inventories to match last year's levels, an
indication that they expect no increases in sales over last year.
All retailers surveyed indicated that prices are drifting upward
both for foreign and domestic merchandise.
Fueled by a new wave of buying incentives, district car sales improved markedly in February from the weak sales volume in February 1987. Dealers are optimistic that the recent extension of incentive programs will continue to boost car sales at least through the end of April.
Construction
The region's stronger states (Florida, Georgia, and Tennessee) are
optimistic that housing starts will increase following a pick-up in
sales due to a lowering of mortgage interest rates. Meanwhile weaker
states (Alabama, Mississippi, and Louisiana) report that the decline
in interest rates has had little impact on both sales and
construction of homes.
There has been considerable overbuilding of residential structures throughout Florida, despite high housing demand aided by the continuing influx of new residents. At the same time, Georgia is experiencing a decline in the housing industry's growth rate. January's single family building permits dropped 22 percent below the year-ago level.
The overall outlook for Tennessee is bright. The major exception is the overbuilt market in Nashville. Alabama's housing industry outlook remains optimistic due to the influx of high tech industries which are attracting residents from outside the state. Housing markets in both Louisiana and Mississippi remain weak primarily because of depressed incomes of residents; however, home prices in New Orleans have recently begun to stabilize because of improving conditions in the oil sector.
Southeast commercial construction, although emerging from its seasonal slowdown, is still being restrained by lenders who are requiring stringent preleasing before financing is provided.
Financial Services
Business loan demand is strong among small to mid-size companies,
and appears to be related to the surge in exports resulting from the
decline in the dollar. Part of the demand is for working capital and
part for purchase of new equipment. However, concern about the
economic outlook has caused some banks to be more cautious about
granting loans.
Tourism
Florida experienced a 25 to 30 percent increase in the number of
foreign visitors from 1986 to 1987 and while expectations for 1988
are for some slowing, the overall outlook remains bright. There was
a 12.5 percent increase in visitors from Canada in 1987 and gains in
1988 are projected at 7 percent. Elsewhere in the District, New
Orleans posted a successful Mardi Gras Festival which attracted
approximately 500,000 people over the 11 day period, reportedly the
best attendance in years. The New Orleans Jazz and Heritage Festival
next month is expected to bring at least 300,000 people to the city.
Mining, Agriculture and Forestry
Oil and gas exploration in the District is increasing. Drilling rig
activity is 50 percent higher than a year ago. In early 1988 coal
production has continued increasing at a rapid pace. Relative to a
year ago, production is up 19 percent.
Prospects for the region's agriculture continue to improve as the government's farm program pumps large amounts of revenue into the District. The export market for grains remains active as indicated by shipments from District ports. Both cattle and pork producers are enjoying relatively high prices for their products. Florida's vegetable and citrus growers are also benefiting from good crops and strong prices.