Beige Book Report: Richmond
November 16, 1982
Overview
There are several indications that the level of business activity in
the Fifth District has stabilized somewhat over the past few weeks.
Reports from manufacturers continue negative, on balance, but most
industries appear to have arrested the decline or even made some
gains in new orders. Overall, labor market trends are also mixed,
recalls and longer workweeks in some areas and industries largely
offset by shorter weeks and further layoffs in others. The retail
sector remains weak by nearly all accounts. There is virtually no
evidence that seasonal fall buying has materialized. Mixed reports
come, as well, from the construction and housing sectors. There has
clearly been no decisive move by either. Loan demand remains
generally soft, including commercial and industrial, consumer
installment, and real estate.
The Manufacturing Sector
Our latest survey of manufacturers suggests minor declines in
shipments, new orders, and order backlogs in recent weeks. In
addition, inventories shrank further, particularly materials, and
employment was down noticeably. Nearly all of this observed
weakness, however, was concentrated in the paper, primary metals,
and shipbuilding industries. The textile industry appears to have
made some significant gains while most other manufacturing groups at
least held their own over the month. A respondent in the paper
industry attributed the weakness at his establishment to a growing
displacement of paper bags by plastic. He does not see the weakness
as a cyclical phenomenon.
It does appear that manufacturing employment declined further in October despite several isolated reports of recalls from temporary layoff. Shorter workweeks and further temporary layoffs predominate in the manufacturing sector. Coal mining areas of the District continue to report weakness in mining employment. What support the labor markets are getting is coming from government, services, and some isolated manufacturing sectors or concerns.
Manufacturers' inventories remain generally above desired levels, as does current plant and equipment capacity. Prices received at the manufacturing level are reported to have declined in the latest survey period, while prices paid were essentially unchanged and employee compensation rose, although narrowly.
Retail Sales
Our information suggests that retail sales deteriorated further in
October, at least after allowing for seasonal factors. The failure
of the expected fall buying surge to develop may be the principal
element here. Retail inventories appear to have declined modestly
and remain generally within acceptable limits. Prices at the retail
level showed no change according to respondents.
Housing and Construction
There have been scattered reports of recent gains in construction
activity, particularly in the residential sector. It would clearly
be premature to pronounce this a recovery, however. There are
indications that the stock of houses on the market, both new and
older, has declined somewhat. There is a sense among the financial
community, however, that the expectation of even lower mortgages
rates in the near future is now a mild deterrent to some prospective
buyers.
The Financial Sector
There is little indication that loan demand is recovering. Further
inventory reduction in the manufacturing and retail sectors is
moderating business loan activity. Consumers continue to pay down
installment debt. Mortgage activity, although showing signs of life
in some areas, remains very weak. Delinquencies do not seem to be a
problem, although there is continuing concern over the rising number
of personal bankruptcies.
Our information suggests that banks are generally retaining 50% or more of the maturing "all-savers" funds and most of that is being rolled into CDs, many of them of 30 months or longer maturities.
Expectations
Manufacturers remain among the most optimistic of respondents. A
substantial majority expects improvement in the level of activity
nationally, locally, and in their respective firms over the next six
months. Retailers are much more cautious, anticipating little change
at all over that period. Bankers, also, are very cautious. Most
respondents in this sector see loan demand increasing little, if at
all, in the near future.
Agriculture
The District's prospective crop output as of October 1 continued to
point to significantly smaller crops of tobacco, peanuts, and cotton
than last year. Record corn and soybean crops are anticipated,
however.
The 1982 flue-cured tobacco marketing season was marked by record average prices and better quality leaf than in 1981. Total volume of sales was down 12 percent from last season, however, and total value of marketings was almost $100 million or 6 percent below a year ago. Loan receipts were up sharply in all flue-cured belts.