Beige Book Report: Richmond
December 9, 1970
Surveys of businessmen and bankers in the Fifth District indicate
general agreement on the following points:
(1) continued weakness in
District manufacturing activity including shipments, volume of new
orders, and backlogs of orders; (2) some improvement in retail sales
except for automobiles; (3) slight improvement in the employment
picture in the retailing and service sectors, but further weakness
in manufacturing employment; (4) some price declines in
manufacturing but continued price advances on retail items; (5)
continued upward wage pressure; (6) slight improvement in
residential building activity; (7) tapering of demand for bank
loans, especially in the business loan category; and (8) a guarded
but favorable outlook for future business conditions.
Although reports are mixed, Fifth District manufacturers on balance continue to report that shipments, new orders, and backlogs of orders are down. Important producers in such industries as furniture, textiles, and chemicals report declines, while other reporters in metals, machinery, coal, and electrical equipment indicate no change or some improvement.
Reports show some improvement in retail sales in the past four weeks, though it is not clear whether the improvement is greater than seasonal expectations. Businessmen in trade and services as well as the District's bankers report improvement. Automobile sales, however, are an exception. Reports indicate substantial further decline in this area during the past four weeks, reflecting the effect of the reduced output.
Manufacturers and retailers report some further increase in inventories, and both groups continue to report that current inventory levels are higher than desired.
Some further declines in employment are reported by District manufacturers in such industries as synthetic fibers, fabricated metal products, and electrical equipment. Additional reductions in the length of the workweek are also reported by some manufacturers. A number of strikes continue to have an influence upon the District's employment situation. Retailers report an increase in employment and in the length of the workweek as seasonally expected.
District bankers continue to report that employment is down in their respective areas and that available labor supplies are somewhat higher, but the proportion of bankers reporting a worsening employment situation has dropped since the November survey. On balance, the latest survey indicates that the manufacturing sector is the weak part of the District's economy as far as employment is concerned, with some of the effect attributable to strikes. Some slight improvement may be occurring in other sectors.
Manufacturers report some declines on balance in prices during the past four weeks—principally among producers of nonferrous metal products. Also, reports of price increases have dropped significantly since the November survey. Retailers, however, continue to report some price increases. Both manufacturers and retailers report the continuation of upward pressure on wages.
District bankers continue to report on balance that residential construction activity in their respective areas is down, but the proportion reporting increases has risen significantly since the survey of four weeks ago. Nonresidential building is reported to have increased somewhat during the past month, as it has for several months.
Business loan demand at District banks is reported down during the past four weeks, continuing the decline reported last month. Consumer loan demand and mortgage loan demand are reported off slightly at District banks, reversing the moderate increases of the past several months.
The outlook of the survey respondents remains favorable. The proportion of respondents expecting improvement in general economic conditions continues significantly higher than the proportion expecting a worsening of conditions. Sentiments are mixed, however, and comments received from reporters indicate a higher degree of optimism among those in retail trade, services, and banking than those in manufacturing industry.
A number of District manufacturers have cut back capital spending plans in recent months, and most of the manufacturing reporters are apparently satisfied with current plans. Many feel, however, that they are operating at production levels which are less than optimal for their present plant and equipment.
Excessive finished goods inventories continue to be a problem for District manufacturers in textiles, furniture, metals, and metal products. Retailers also indicate that inventories remain at higher levels than they desire.