Beige Book Report: Richmond
June 30, 1981
Overview
Responses to our latest survey of Fifth District business conditions
suggest a modest downturn has occurred over the past month. On
balance, manufacturers contacted report slight declines in
shipments, new orders, and order backlogs. For many, however,
shipments and new orders seem to have held their own and there
remain isolated areas of moderate strength. Retailers report little
change in total sales, but sales of big-ticket items have slowed in
recent weeks. Employment appears to have fallen in both the
manufacturing and retail sectors. The inventory situation is mixed.
Retailers experienced some buildup over the month. Manufacturers
report significant accumulation of materials while stocks of
finished goods are down sharply from a month ago. In general, loan
demand across the District has been moderate, but residential
mortgage activity continues weak. Recent severe weather conditions
have attenuated earlier optimism concerning crop and livestock
production prospects. Crop conditions remain generally favorable,
but have declined in some areas over the past two weeks.
Consumer Spending
It is difficult to discern any clear pattern in consumer activity.
Significant disparities exist among localities and sectors. Our
survey suggests little change in total retail sales from a month
ago, but some weakness in big-ticket items, particularly
automobiles. Overall, however, demand for consumer installment loans
is seen as moderate with significant strength appearing in some
areas. Among general merchandise lines, those of better quality
continue to be the better performers. Those retailers surveyed
report inventories unchanged to slightly higher and employment
unchanged to slightly lower. Richmond directors also found little
change in retail inventories other than automobiles. Automobile
dealers have experienced rising inventories, but this has been
attributed to seasonal factors.
The Manufacturing Sector
In the manufacturing sector activity declined modestly over the
latest survey period. This decline was most noticeable in new orders
and order backlogs, but shipments were also off slightly. The
textile, building materials, furniture, and electrical equipment
industries held their own over the month, but most other groups seem
to have experienced some relative weakness. According to our survey
respondents, materials inventories have risen lately while stocks of
finished goods were down sharply. Our directors, for the most part
characterized manufacturing inventories as steady. Nonetheless, over
half of manufacturers surveyed feel current inventory levels are
higher than desired. Employment was off slightly among those
surveyed, but the average workweek was unchanged.
The Financial Sector
Loan demand has generally been steady in recent weeks but does seem
to vary by type of loan and locality. Commercial and industrial
loans have been weak to moderate with only isolated areas of
significant strength. Demand for consumer installment loans has been
steady and moderate in most areas, but, once again, areas of
strength have emerged. Demand for non-residential and, particularly,
residential mortgages continues to be weak.
The Outlook and Prices
Manufacturers and retailers surveyed report a continued abatement of
puce increases. Over 40 percent of the manufacturers surveyed paid
no higher prices than a month ago, and over two-thirds held the line
on prices received. Nearly half of the retail respondents reported
no change in prices paid and received over the month. Manufacturers
are somewhat less optimistic than a month ago about the business
outlook, but retailers are decidedly so. Fewer than half of the
retailers expect business activity nationally, locally, and in their
respective firms to improve over the next six months. Nearly one
respondent out of eight, from both sectors, expects business to
deteriorate over that period.
The Agriculture Sector
Fifth District crop production prospects for 1981 were fairly
optimistic as of mid-June. With the exception of soybeans, virtually
all spring and summer crop plantings were complete. Conditions of
the major crops were reportedly as follows: tobacco, good to
excellent; peanuts, fair to excellent; cotton, fair to good; corn,
fair to excellent but mostly good; and early-planted soybeans,
peaches, and apples, mostly good. High temperatures caused crop
conditions to decline in South Carolina during the third week of
June however, and resulted in the loss of more than 75,000 broilers
and breeder hens in North Carolina.