Beige Book Report: Richmond
April 12, 1977
Business activity in the Fifth District picked up sharply in March judging from our latest survey. Manufacturers surveyed indicate widespread increases in shipments, new orders, and backlogs of orders. Also in the manufacturing sector employment and weekly hours increased after experiencing minor declines in the last survey period. Total inventories remain above desired levels. Manufacturers continue to report widespread price increases, particularly in the prices they are paying. Retail sales improved among our survey respondents and sales of big ticket items relative to total sales also picked up slightly during March. Manufacturers and retailers remain strongly optimistic although the strong gains experienced recently have apparently fulfilled their positive expectations to some extent. In the banking sector, the center of activity over the past few weeks has been the commercial lending area. Virginia's early peach and apple crops suffered extensive freeze damage during the first week in April.
Of manufacturers responding to our April survey, more than one-half report increases in both shipments and the volume of new orders over a month ago. There was also a general increase in the level of backlogs of orders. Despite the fact that stocks of materials were essentially unchanged and finished goods inventories showed some decline, the number of manufacturers reporting current inventories exceeding desired levels increased from the last survey period. More than one-third of the manufacturers view current inventory levels as excessive, while fewer than one in eight considers them inadequate.
Over one-third of our manufacturing respondents increased employment during March while nearly one-fourth worked more hours per week. Although a few more respondents have come to view current plant and equipment capacity as inadequate, they continue to be outnumbered by those who feel it is in excess, and there is still little sentiment for enlarging current expansion plans.
The textile industry appears to have accounted for much of the improvement in our survey results this month. Nearly 90 percent of the respondents from that industry reported improvement in the volume of new orders and one-half also noted increased levels of shipments. The chemicals and primary metals groups also experienced some general improvement as they did a month ago. The apparel industry, on the other hand, appears to be still awaiting any significant improvement in activity. The furniture industry also has not experienced any general pickup, although there are some signs this month the industry may be nearing a turnaround.
Of the retailers responding to our survey this month, two-thirds experienced improved sales activity and 40 percent report an increase in the relative sales of big ticket items. Inventories at retail rose generally but remain essentially in line with desired levels.
Both manufacturers and retailers continued to experience widespread price increases, particularly in prices paid, during the past month. Prices received and employee compensation also continued to rise across a broad front. Manufacturers and retailers surveyed remain quite optimistic concerning the outlook for the next six months, with half the retailers and nearly two-thirds of the manufacturers expecting further improvement in business conditions nationally, locally, and within their respective firms over that time period.
Business loans of weekly reporting banks have risen $100 million in recent weeks, more than the increases in other major lending areas. Consumer installment lending has slowed down a good deal and real estate lending is likewise not as strong as it has been. The increases in business lending are fairly well distributed across industry groups, although the durables manufacturing area seems to stand out; borrowing by metals and machinery producers is strong. There have also been significant increases in loans to the textile industry, and to the wholesale and retail trade groups.
In the agricultural sector, the full extent of the freeze damage to the peach and apple crops has not been determined, but the loss is believed to be as high as 90 percent in some orchards. With this year's loss, Virginia orchardists have had a major peach kill for six consecutive years and a major apple kill for two years in a row.
District farmer's cash receipts from farm marketings in January were up about 9 percent over a year earlier, compared with an 8 percent increase nationally. Sharply higher crop receipts, due primarily to marketings of crops carried over from last year, accounted for all of the increase.