Southeast building to slow despite growth

By Arnold A. Dill Senior Vice President Chief Economist The Citizens and Southern National Bank

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southeastern states are often thought of as a homogeneous, Sunbelt region, nothing could be further from the truth.

Florida, which receives one-third of the region's income, is a super high-growth state featuring a service based economy.

Economic performance in the regional states outside Florida has been very diverse in recent years. Alabama, Mississippi, and Tennessee were hard hit during the 1981-1982 recession. These states have heavy industry that was severely impacted by the national downturn. North and South Carolina, with their large, light manufacturing industries, also felt the recession. Georgia and Florida continued to grow, but at a slow pace.

Despite the varied economic performance, housing starts rebounded strongly in 1983 in all the southeastern states and were up 7ls/o in the region compared with 6390 in the U.S. By late summer 1984, growth in residential construction had slowed sharply throughout the region, with the greatest slowdown occurring in Alabama.

Looking ahead to 1985, economic activity will continue to expand in much of the southeast, but at a slower pace that has already set in during the second half of 1984.

Building activity will surely slow in the fast-paced Florida and Atlanta :ueas, but these locations should remain the most rapidly expanding areas next year.

The housing outlook within the region hinges, just as it does nationally, on the interest rate outlook. The rapidly growing southeast tends to have somewhat larger fluctuations in construction activity than does the nation as a whole. The decline in long-term interest rates from June to October 1984 should arrest the decline in the region's housing activity and eventu- ally cause some revival in early 1985.

The biggest uncertainties in the interest rate outlook are the international value of the dollar and the huge federal deficit. If the economy expands at a moderate rate next year as expected, interest rates would reverse and begin to rise moderately. Such a development would eventually cause renewed weakness in the housing market and keep the region's 1985 housing starts below the 1984 level.

However, housing excesses in many of the region's major markets do not appear nearly as great as those which occurred in the mid-1970s, a healthy condition which should cushion the expected downturn in housing activity. In the happy event that interest rates continue their recent decline, housing would revive more strongly in the region than in the U.S. next year with starts moving above the 1984 level.

The longer run outlook for the region remains positive. Geographical amenities, low cost of living and doing business, outstanding transportation, and a growing dynamic market will continue to spur above average growth in the region, especially in much of Florida and in the Atlanta metro area.

Between 1983 and the year 2000, the most rapid growth areas within the region will be Florida's Gulf Coast metro areas, Orlando, selected East Coast Florida cities, and the Atlanta metro area. By the year 2000, absolute population growth in the region is expected to be geatest in Tampa, Fort Lauderdale, Miami, West Palm Beach, Atlanta and Nashville.

Story at a Glance

Slower economic expansion in the South. . .Florida and Atlanta metro areas willbe hot spots ot business. .interest rate is pdme factor in business. .long range outlook positive.