Beige Book Report: Richmond
January 12, 1971
Surveys of businessmen and bankers in the Fifth District indicate general agreement on the following points: (1) continued weakness in shipments, volume of new orders, and backlogs of orders in manufacturing; (2) general improvement in retail sales and some slight improvement in automobile sales: (3) some improvement in employment; (4) more numerous price declines in manufacturing, but not in retail goods or services; (5) continued weakness in residential construction; (6) cutbacks in business loan demand and mortgage loan demand at district banks, but some increase in consumer loan demand; and (7) a favorable outlook for the immediate future despite discouragement over current business conditions.
Although reports from district manufacturers are mixed, the consensus is that shipments, volume of new orders, and backlogs of orders continued weak during the month of December. Important producers in such industries as chemicals, synthetic fibers, electrical equipment, and nonferrous metals indicate that the weakness of the past several months remains. Reporters in building materials, furniture, and hosiery indicate stability or some improvement.
Businessmen in trade and services and district bankers report improvement in retail sales, in line with seasonal expectations. Automobile sales reportedly remain weak, although some improvement is noted from the dismal auto sales reports of the past three months when reduced output significantly affected district sales.
Manufacturers report further slight increases in inventories of finished goods, while retailers' inventories have reportedly been reduced. In both areas, however, current inventory levels are reported to be higher than preferred.
Reports of further declines in employment have become decidedly less numerous among district manufacturers, although they continue to outnumber reports of increases. Respondents' reports as well as comments received indicate that the district employment situation may be beginning to stabilize. District bankers report that in their respective areas employment declines have tapered off, and reporters in trade and services indicate an increase in employment in December as seasonally expected.
District bankers report that labor supplies in their respective areas remain high, and in the manufacturing sector, some further reduction is reported in the length of the workweeks. Several significant strikes, however, continue to influence the employment situation in the district.
Reports of price declines outweigh reports of price increases among district manufacturers in December for the second consecutive month. Declines are reported by producers in chemicals, nonferrous metals, and coal. Most manufacturers, in both durable and nondurable lines, report no change in prices during the past four weeks. Respondents in retail trade and services, however, report continued price advances. Upward pressure on wages is reportedly continuing strong across the board.
District bankers report that on balance residential construction in their respective areas remains weak, but the proportion reporting increases continues to rise slightly. Comments received from respondents indicate an expectation of increased activity in the residential construction field, but no significant recovery is yet occurring. Nonresidential building, however, reportedly continued to increase moderately in the past four weeks.
The demand for business loans and mortgage loans is reported by district bankers to have declined sharply during December. Consumer loan demand, however, reportedly increased during the same period.
The degree of optimism among district survey respondents concerning the economic outlook has been diminishing since September. While the outlook remains favorable on balance, comments received from respondents indicate some discouragement over the failure of the economy to exhibit stronger signs of recovery. Continued rising prices, weakness in employment, and the effects of strikes have been most frequently mentioned as reasons for lack of confidence. Manufacturing respondents in particular continue to cite high inventory levels and excess productive capacity among their unresolved problems at present.