Beige Book Report: Richmond
June 17, 1970
Information obtained in the Fifth District, primarily through surveys of businessmen and bankers, indicates substantial agreement on the following points: (1) a weaker employment situation with some further increases in unemployment, (2) continued upward wage pressure, with a few price declines in manufacturing, (3) further weakness in retail trade and automobile sales, and weakened consumer loan demand, (4) continued severe slump in construction, but some increase in the demand for mortgage loans, (5) no diminution in demand for additional capital facilities, (6) continued weakness in new orders, order backlogs, and shipments in manufacturing, and (7) excessive levels of business inventories.
Manufacturers in the District continue to experience declines in shipments, volume of new orders, and backlogs of orders. Both durables and nondurables manufacturing lines are affected by the current slump which has been in evidence since the beginning of the year. This situation is reported in such important District industries as textiles, chemicals, nonferrous metals, and furniture.
Weakness continues in the retail trade sector, including automobile sales. Some survey respondents report that, while dollar volumes of retail sales are not necessarily declining in all cases, physical volumes definitely are. The consensus in the District is that consumers are also sacrificing quality, and are reacting to inflation by purchasing goods of lower quality with cheaper price tags.
Inventories in manufacturing reportedly have declined only slightly during the preceding month, and no significant change is reported in retail inventories. Current levels of inventories in both areas, however, are reported to be higher than desired.
The employment picture in the District is reported to be considerably weaker overall. Survey respondents in manufacturing also report a further decline in hours worked per week. The trade and services area seems somewhat stronger with regard to employment than does manufacturing.
On the unemployment question, persons in trades and services say that ample supplies of both skilled and unskilled labor are now available, in contrast to reports of previous months. Respondents in manufacturing, however, where the employment situation is apparently weaker, report local supplies of skilled and unskilled labor still to be inadequate. Many respondents, though, report the quality of available labor to be seriously deficient in both skilled and unskilled groups.
Wages in the District are reported up sharply across the board, particularly in the trades and services. Prices have reportedly declined somewhat in the manufacturing sector, while continuing to rise in other areas. Price reductions are reported by several large textile manufacturers as well as by some furniture producers.
Residential construction reportedly declined further in the preceding month and remains severely depressed. Nonresidential construction also is reported down, a reversal of the report received in May.
Demand for consumer loans apparently weakened somewhat during the preceding month. Some respondents link this to reduced work weeks and general uncertainty about the future course of incomes, particularly among manufacturing employees. Further increases are reported in demands for business loans and mortgage loans.
Opinions expressed in the Fifth District continue to emphasize the numerous noneconomic factors presently contributing to uncertainty, both at home and abroad. Economic decisions in the District apparently are being influenced by these factors.
A more detailed survey of capital spending plans in the District last month indicated continued strength in plant and equipment spending. The most recent survey indicates no significant change in plans. Manufacturers generally report capacity to be somewhat in excess, but the proportion of them desiring to increase investment spending continues to outweigh the proportion that does not plan to do so. In the trade and service fields, the reported consensus is that facilities are inadequate, and there is evidence of increases in investment plans. Fear of continued inflation is apparently an important factor.
Respondents report inventory levels to be excessive across the Board. More concern is expressed by manufacturers than by retailers, and the reports cover a broad spectrum of District industry—textiles, furniture, metals, and building materials producers.
District bankers express the view that further economic decline is probable before a general recovery occurs, although a smaller proportion of respondents hold this view than in previous months.