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ATLANTA: CENTER OF THE SOUTHEAST A presentation by Robert P. Forrestal President Federal Reserve Bank of Atlanta May 1984 It is a pleasure to visit your beautiful country and to tell you a little about the economy o f my beautiful home city o f Atlanta. I believe that we have a very good and a very optimistic story to bring you about what is happening in Atlanta now and what to expect for the future. As I explain our economy, I will use some slides. I have also brought you some copies of the charts that are the subjects o f these slides. Included with these charts are copies of the "Georgia Report" prepared by my bank, the Federal Reserve Bank o f Atlanta — one of 12 regional Reserve Banks in the Federal Reserve System, our nation's central bank. These reports will give you more details than I will be able to cover during my short talk. If I were to describe the economic outlook in my country in just one sentence, it would be this: The outlook for the United States is good, the outlook for the southeastern states is better, the outlook for the State o f Georgia is still better, and the outlook for Atlanta is best of all. I say this in spite o f the fact that, as you know, interest rates have risen recently in the United States. Today's higher interest rates will not stop our recovery, although they could well slow it down. That slowing o f our growth is healthy and necessary; we could not safely maintain the rapid expansion we were experiencing at the beginning o f this year without reigniting inflation. -2 - The United States is continuing its recovery from the recession o f 1981-82. Over the last four quarters, our gross national product — we call it GNP — rose at a 6.5 percent rate in real terms, adjusted for inflation. Looking ahead, we are beginning to make a successful transition from recovery — a period o f rapid growth from recession troughs — to the more mature type o f expansion that can be sustained over long periods o f time. For technical reasons, growth could be quite slow during this calendar quarter, but the consensus is for an increase in real GNP o f about 5 percent for the fullyear 1984. During the recession, the southeastern states, as a group, generally fared better than the rest o f the nation. For that reason, they were in better condition to take advantage o f the recovery when it began late in 1982. The average unemployment rate for the states in our Sixth Federal Reserve District— Georgia, Alabama, Florida, Louisiana, Mississippi, and Tennessee — had retreated to 7.5 percent by March, the most recent date for which we have a reliable figure. the nation's 7.8 percent. This is significantly lower than But the picture is even better in the State o f Georgia and in Atlanta. (C H AR T 1: UNEMPLOYMENT RATE) This chart shows the sharp contrast between the unemployment rates o f Atlanta and the nation. It is interesting to note that, during the worst part o f the recent recession, Atlanta's unemployment never rose above 7.3 percent, while the national unemployment rate reached 10.8 percent. Now, a fter more than a year o f the recovery, the Atlanta unemployment rate has improved to 5 percent by March o f this year, while Georgia's rate has declined to 6 percent and the national rate has moved downward to 7.8 percent. You will note that, even during the worst part o f the recession, Atlanta's unemployment rate was better than the nation's is now. stronger than the nation's? Why did our city's economy remain so much The answer is that its economy is well diversified and is -3 - not heavily dependent on manufacturing. creates more jobs than producing goods. In Atlanta's economy, providing services That protected it from many o f the most severe problems o f the recession. (C H A R T 2: DEPARTMENT STORE SALES) This chart, comparing department store sales in Atlanta and the United States, reflects the relatively high personal income and confidence o f our city's residents. have been healthy in Atlanta since early 1982. Retail sales As measured by sales tax collections, retail sales in January and February were growing at an annual rate o f 17 percent in both Georgia and Atlanta. Our business sources also te ll us that sales in March and April were above their levels o f a year ago. The sharp drop beginning in late 1980 that you see in Chart 2 represented the delayed e ffe c t o f an earlier national recession. That recession briefly slowed the flow o f new residents moving from other parts o f the United States to our city. You will notice, however, that the 1981-82 recession did not seriously a ffect sales in Atlanta. (C H AR T 3: NEW AUTOMOBILE REGISTRATIONS) This chart o f new automobile registrations provides more evidence o f the economic strength o f Atlanta and the State o f Georgia. figures for the city, alone. volume shown for Georgia. Unfortunately, we do not have separate However, Atlanta accounts for a large part o f the sales In April 1983, new automobile sales began to grow rapidly across the United States, reaching an annual rate o f around 15 percent by last December. In Georgia, the growth in automobile sales began a month earlier and rose even more rapidly, rising to an annual rate o f nearly 40 percent by the end o f last year. In the first two months o f this year, automobile sales in Georgia were extrem ely high, with the annual gain reaching 73 percent. Our sources te ll us, however, that sales in March and April dropped to a more sustainable level. -4 - (C H AR T 4: RESIDENTIAL CONSTRUCTION) This chart, comparing the construction o f new homes in the United States, Georgia, and Atlanta, tells the same story. Because Atlanta constantly attracts new residents, the construction o f new homes in Atlanta consistently moves at a faster pace than in the nation. It was the nation's strong increase in construction activity, beginning in late 1982, that started the recovery. Nationally, the pace o f residential construction in the closing months o f 1983, as measured by the number o f new construction contracts signed, was running about 60 percent above the level o f the same period on 1982; it declined to about 50 percent more recently. in Georgia, and even more so in Atlanta. But the improvement was more dramatic In Atlanta, the pace o f residential building in late 1983 was nearly tw ice as fast as it had been the year before. In early 1984, it continued at a pace about 80 percent faster than a year earlier; it has slowed somewhat since then. Although I have no chart showing nonresidential construction, I would like to mention Atlanta's facilities for business offices. At present, business offices are opening or expanding in Atlanta faster than new o ffice space is being built. For that reason, the vacancy rate is declining and o ffic e rental rates have risen somewhat. However, Atlanta still offers some o f the finest o ffice space at rental rates that remain among the lowest in the nation. (C H AR T 5: COMMERCIAL BANK DEPOSITS) This chart is based on monthly data, rather than on a twelve-month, moving average, so it reflects some sharp fluctuations resulting from seasonal and other factors. While the pattern o f growth has been erratic, it has remained above the average growth rate for the nation; in March o f this year, deposits in Georgia banks were 15 percent above their level o f a year earlier. You will also be interested to know that the total dollar value o f loans made by savings and loan associations in March was about 40 percent -5 - higher in both Atlanta and Georgia than a year earlier. This was made possible by very strong deposit growth experienced by our savings and loan associations. (C H AR T 6: AIRLINE PASSENGERS, 1983) Our large, modern, and well-designed Atlanta International Airport can handle many more passengers than its current heavy volume. As this chart shows, in 1983 it handled 38 million passengers, while the tw o airports in Chicago handled 45 million and the three airports serving the New York C ity area handled 64 million. A ir travel was stimulated last year by some active price-cutting competition among our airlines. T ra ffic is now slightly lower, since fares are returning to more normal higher levels. In March o f this year, international tra ffic at Atlanta’s airport was 21 percent greater than it was a year earlier, suggesting a strengthening o f the business ties across the Atlantic. (C H A R T 7: CONVENTION ATTENDANCE, 1983) Conventions are major attractions that draw both domestic and international visitors to Atlanta. This chart compares convention attendance in Atlanta last year with attendance in the two considerably larger cities that currently draw more convention visitors. Atlanta continues to work hard at improving its convention facilities — already among the best in the nation — and we expect to increase our share o f that business steadily in the future. One project that will help Atlanta do that is the expansion o f our Georgia World Congress Center; by the end o f this year, its size will have nearly doubled — reaching a total o f 640,000 square feet. (C H AR T 8: HOTEL ROOMS, 1983) One o f the main reasons why Atlanta can take care o f so many convention visitors so well is shown on this chart. Atlanta had 35,000 hotel rooms in 1983 — most o f them quite new, modern, and very comfortable. By contrast, Chicago had 40,000 and New York City about 100,000 — many o f which are older, less attractive, and much more expensive. Tw o luxurious new hotels have already opened so far this year in Atlanta, adding about 1,000 new rooms and bringing our total to 36,000. for seven more. Plans are being made One new hotel, already under construction near Atlanta's business center, will o ffer over 1,600 rooms. The State o f Georgia has many other attractions outside o f Atlanta. The number o f visitors to most o f these attractions was much higher this March than last; for example, our state parks saw an increase o f 19 percent, our national parks saw an increase o f 15 percent, and our visitors' centers saw an increase o f 16 percent. (C H A R T 9: FOREIGN TRADE AC TIV ITY) This chart shows the effects o f the strong United States dollar and the economic recessions in the United States and in other nations. These factors have worked together to cut exports from the United States and reduce the nation's total trade activity with other nations. the nation. You will notice, however, that Georgia has not suffered as badly as It is interesting to note that, o f all the customs districts in the Southeast, the Savannah district, which represents the entire State o f Georgia, was the only one to show any growth at all during the recent recession. In tim e, our nation's current imbalance between exports and imports should weaken the dollar's value in terms of other currencies and that, in turn, should help us move toward a more balanced growth in foreign trade. -7 - (C H AR T 10: SAVANNAH PORT AC TIV ITY) This chart shows the relative importance o f exports and imports through Georgia. You see that imports passing through the Port o f Savannah continued to grow during the recent recession; this was made possible partly by the port’ s expanded facilities. By contrast, export growth slowed sharply as the foreign exchange value o f our dollar strengthened and the economic problems o f some o f our trading partners mounted. Fortunately, export growth began to rebound in mid-1983. Again, we expect that, in time, a better exchange rate between our currency and the currencies o f our trading partners will help to stimulate Georgia’s foreign trade even more. Improvement in the economies o f nations in Europe and around the globe will also help. CONCLUSION To summarize, Georgia’s economy is healthy, and Atlanta's is even more robust. Every sign points to a continuation o f this economic vigor, although its pace will definitely slow as a result o f the recent increases in interest rates. Atlanta stands ready to welcome business people o f other nations who want to share in that growth. Perhaps because its clim ate is pleasant and its homes, gardens, and trees are beautiful, Atlanta's citizens are happy, friendly people, ready to greet you warmly and join with you in a partnership that both you and they will enjoy. 2 -2 ? A "D v c QL to C o ^ Of S' R P F 's ^^M .cC ^w av'i'cw pres LvC^t^ i^v> & Vv y o w . ^ iw e ^ 1' f b ,_ Vu^TT £- cx t o t iv t? c - ^Vi (l u j e. c* C r «1 U->.u^ 1 4- JT i ( ^ 7 'tV^<-~-^- ' U uc - f .' ~ \ } c n t u z ^ ^( ss w. W\ * f l v J t f^ / y c . 'if S 9 l/i y ) 75 n t))(J ^ < 5 - FEDERAL RESERVE BANK OF ATLANTA O ffic e Correspondence April 6, 1984 To: Mr. Forrestal From: Duane Kline Subject: Scandinavian Mission Carol Martel, o f the Atlanta Chamber o f Commerce, gave me a little information today that may be o f interest to you. For one thing, she wanted to be saure you were aware that you probably will get some questions about the outlook for interest rates in the U.S. As you know, European business people are quite sensitive about the extent to which High interest rates here are drawing capital out o f their economies. For related reasons, you may expect questions about economic policies and President Reagan's prospects for reelection, and whether Chairman Volcker is likely to continue as Chairman after the election. She says they are expecting around 200 to attend the program in Stockholm, with small er groups o f around 75 each at Goteborg and Helsinki. She requested that we supply her with 250 copies o f our February 1984 Economic Review by early May so that she can ship them over in advance; this will be no problem. I f you plan to hand out copies of the Georgia Report, a like number o f these will also be necessary. An overhead projector will be available at each location, so the use o f transparencies presents no problems; two sets should be prepared, in case one set islost or damaged. Again, 250 photocopies o f these transparencies should be provided for use as handouts; I'm assuming you will want to do this, as well as leaving copies o f the Georgia Report with them. Shipping all these handouts in early May means they will not include all o f the latest figures w e'll be able to give you just before you depart. However, that may give yuou an opportunity to draw additional attention to any particularly important new develo9pments. May 15, 1984 For: Sheila Tschinkel From: Don Bedwell Subject: Forrestal speech Mr. Forrestal suggested that we show this to you before it goes down to him Wednesday prior to his trip to Scandanavia with the Atlanta Chamber o f Commerce trade mission. It is a relatively brief presentation that he will deliver, along with slides now being completed by the database team, to business audiences in three Scandanavian cities. Duane Kline prepared the presentation with the help o f economists from Gene Sullivan’s regional research team. We showed a draft to Mr. Forrestal last week and this version incorporates several o f his suggested changes, as well as some contributed by others. Duane is trying to arrange for a tim e tomorrow when we can give Mr. Forrestal a preview o f the slides to go with the text.
@FedFRASER