Beige Book Report: Richmond
March 23, 1982
Overview
Pessimism pervades recent reports on Fifth District business
activity and there appear to be very few bright spots to help this
outlook. Other than the tobacco industries and some energy related
activities such as coal mining and gas drilling, economic and
business activity seems almost uniformly weak. Manufacturers report
further declines in shipments, new orders, and order backlogs in the
past month. Retailers report little change from the low levels of
sales in recent months. Residential construction has shown no signs
of recovery. Automobiles and other consumer durables are not moving.
As a result, large segments of some industries; stone, clay, and
glass; textiles; and major appliances; are operating at severely
reduced levels.
The Manufacturing Sector
Although the rate of decline may have moderated over the past month,
District manufacturers report continued weakness in most measures of
activity. New orders and order backlogs were down broadly and over
half our respondents report reductions in employment and in the
length of the average work week since last month. Inventories are
generally higher with stocks of finished goods up substantially.
Current plant and equipment capacity is considered excessive by most
respondents. Over one-third of the manufacturers surveyed report
declines in prices received and several report paying lower prices
than last month. Employee compensation, on balance, appears
unchanged recently.
Consumer Spending
Retail trade has shown few signs of any recovery. Automobile and
other big ticket items, in particular, are not moving at all and
large inventories are causing trouble among dealers. Furniture and
major appliances are in a holding pattern awaiting some pickup in
housing construction and sales, but there is little expectation of
any significant improvement over the next few months. There are
scattered reports that we may be seeing some stirrings in the
general merchandise lines, but the evidence is far from conclusive.
There is a widely held view that negative expectations are, and will
continue to be, a severely depressing factor with consumers.
Housing and Construction
The construction industry continues spotty with the housing sector
almost uniformly weak. At this point even pockets of strength in
housing seem non-existent. Commercial and industrial construction
continues to lend some strength, but even here the situation seems
to have deteriorated in recent weeks. Projects already underway are
continuing, but there are few indications that much new activity is
appearing. The outlook for construction is little more positive than
current conditions. Despite a generally perceived backlog of demand
for housing units financing terms and uncertainty about the
prospects for long term financing have created a block against any
turnaround in construction activity.
Agriculture
Comments of Richmond directors suggest that prospects for
agricultural output are generally favorable around the District.
Moisture conditions in some areas are reported to be the best in
four years. With cigarette production at current high levels tobacco
prices have been favorable to farmers. Other farm prices are
generally weak and several of our directors see serious problems for
District farmers under the circumstances.
The Financial Sector
Business loan demand is very weak but generally stable according to
our directors in the financial sector. Mortgage lending is also soft
across the District. Response to the expanded IRA eligibility has
apparently been somewhat weaker than expected, at least to date.
The Outlook
The outlook of manufacturers surveyed continued to improve over the
past several weeks. Nearly a third of the respondents expect the
level of activity nationally to improve over the next six months and
almost half expect improvement for their respective firms. Retailers
are even less pessimistic. As noted above, the outlook for housing
remains very uncertain. There is some concern that home buyers must
adapt to the new types of financing and that this factor will
further delay a full blown recovery. On the other hand, the backlog
of housing demand is expected by some to make activity extremely
responsive to a decline in interest rates.