Beige Book Report: Richmond
June 23, 1982
Overview
Fifth District business and economic activity continues very weak
and by many measures has deteriorated further in recent weeks.
Generally, activity in the manufacturing sector has continued to
decline. Manufacturers surveyed report further declines in
shipments, new orders, and order backlogs in the past month.
Inventory liquidation has apparently moderated but continues. Retail
sales began to show some life but big ticket items were not helped.
Sales and construction in the housing sector have made no
appreciable recovery from the very low levels of recent months.
Business and mortgage lending activity is generally quite slow.
Consumer lending continues spotty and basically weak, but may have
picked up slightly from former levels. Expectations continue to
improve and are quite strong among survey respondents.
The Manufacturing Sector
Sales, shipments, and order backlogs all declined further during the
latest survey period according to our manufacturing respondents.
Once again, stocks of materials declined while finished goods were
basically unchanged. Nearly a third of the respondents, however,
still view current inventories as excessive. Manufacturing
employment among respondents also continued to fall during the mid-
May to mid-June period, as did the length of the average work week.
Official reports just becoming available, however, indicate that
manufacturing employment, as well as total employment, began rising
in the early spring in most areas of the District. Unemployment
rates remain high but have dropped back from the record levels
reached in March. Respondents further report no change in employee
compensation and actual declines in other prices paid and received
over the past month. Optimism continues to spread among these
manufacturers as about three quarters expect business conditions to
improve shortly.
Consumer Spending
Survey responses suggest a modest improvement in the retail sector
in recent weeks. This improvement has been narrow, however, and
there is some evidence that it may mask a decline in sales of big
ticket items. Retailers surveyed and Richmond directors believe that
sales of durable goods have been reduced to those absolutely
necessary. Any improvement, in this view, will be dependent upon a
change in consumer attitudes. They do not see such a change as
imminent, however. Our information further suggests a continuation
of consumers paying down debt and increasing savings.
Housing and Construction
Little change is evident in this sector. Sales of houses and
construction generally remain very slow, and there is no apparent
expectation of significant near term improvement.
The Financial Sector
Richmond directors generally expect little or no increase in
business or consumer loan demand over the next few months. They find
that businesses have reduced their loan requirements through
inventory liquidation but that the process may still have a way to
run. While some business sectors like autos and wholesalers are
thought to be near the minimum levels for inventories, other
industries are seen as likely to reduce stocks further. Generally,
business borrowing is being restricted to the absolute minimum.
The outlook for consumer lending is no better. There is little expectation that consumers' purchases of durable goods will show any sustained improvement in the next few months. Here too, purchases are being made only in near emergency cases.
The Outlook
Manufacturers responding to our survey have become even more
optimistic than last month. Nearly three fourths of them expect the
level of business activity nationally, locally and in their
respective market areas to improve over the next two quarters.
Retailers, on the other hand, still expect little or no change in
the level of activity over the remainder of the year.