August 7, 1991
Overview
Businesses contacted in July indicate that signs of recovery are
spreading slowly through the Southeast. Retailers report continued
sales improvements which included scattered gains in consumer
durables. Manufacturers' reports continue to be mixed, but more told
of increased orders and production than earlier this year. Though
home sales leveled off, inventories of unsold homes have fallen and
building has edged up in a few markets. Industry contacts report
that cotton and peanut crops have shown marked improvements from
earlier rain-related conditions. No exceptional wage or price
pressures were reported.
Retail Sales
June and early July retail sales have maintained the modest growth
rate posted in the spring. District retail contacts all stated that
apparel and home furnishings were leading the sales increases;
reports on durables were mixed. One large retailer reported that
furniture and appliance sales are down after doing better earlier in
the year. Although, three out of four automobile dealers contacted
increased orders of new models in response to better sales, their
orders are still below last year's levels. Merchants plan no
increases in orders except for apparel, and inventories continue to
be lean. Reported declines in June retail advertising confirm
retailers' cautious behavior.
Tourism and convention travel continues to do relatively well. Adjusting for normal seasonal fluctuations, contacts in Atlanta, New Orleans, and Orlando report further monthly increases in convention bookings and visitors for June and early July. The owner of an economy hotel reported that business "bounced back" in the second quarter and future sales look promising for that segment of the market since travelers continue to trade down in the cost of accommodations.
Manufacturing
Mixed manufacturing reports mirror the scattered improvements noted
by retailers. A little over half of the manufacturers contacted saw
evidence of a turnaround in orders. Textile producers unanimously
report increased work hours and production levels in response to
rising orders. Producers of refrigeration and air conditioning
equipment, and carpet and carpet tiles all report stronger orders
and production over previous months this year. A furniture
manufacturer has increased production in response to better sales. A
spokesperson for an automobile company expects one assembly plant in
the region to soon increase hours worked in response to rising
orders. Exports of paper products and kaolin continue to grow.
The remainder of the manufacturers have not yet seen any improvement in orders. A heavy equipment dealer, upon seeing further declines in sales early this summer, made additional inventory reductions. In Florida, a packaging company contact reported that June sales were down significantly on a year-to-year basis while a building materials manufacturer with excess inventory has seen no rebound in sales and is continuing to trim payrolls. Farm equipment sales have not recovered from their earlier depressed levels even though the weather has improved significantly. Grain and phosphate rock exports remain weak.
Financial Services
Three out of four bankers contacted reported some increases in June
and July loan demand over last year. A few bankers also indicated
that a strengthening of the financial condition of their customers
has resulted in a slightly higher loan approval rate. A real estate
lender in Georgia said that improved profitability of single family
homebuilders has helped this June's new residential construction
loans to significantly exceed last June's levels. However, some
residential and commercial developers still say that they cannot get
the financing to build. Auto dealers emphasize that credit terms are
tight. Credit terms for small businesses do not appear to have
eased.
Construction
Most residential realtors reported that home sales leveled off in
June and July at levels about even with or slightly above those of
last year. Higher FHA down payments have reportedly knocked out some
potential home buyers. Diminished new home inventories have recently
stirred activity in some residential markets. All commercial
builders contacted believe that nonresidential construction has hit
bottom but no rebound is expected for some time. Public projects are
still the only reported strength in nonresidential construction
throughout most of the region.
Wages and Prices
Employers generally report no increases in wage pressures.
Substantial layoffs over the last year have increased pools of job
applicants. Some natural gas producers are scaling back production
and contemplate layoffs as a result of depressed prices. Several
leasing agents reported that office rental rates have leveled off in
the last sixty days at about thirty percent below last year's rates.
Rising lumber prices have raised residential construction costs;
however, homebuilders noted that they have been purchasing
appliances at prices below those four or five years ago.