Beige Book Report: Richmond
February 2, 1983
Overview
Once again, there was little change in Fifth District business and
economic conditions over the month, although reports vary from area
to area and from sector to sector. Overall, the manufacturing sector
softened somewhat with new orders and order backlogs down slightly,
but with inventories down significantly. On the other hand, retail
sales activity has apparently firmed in recent weeks, although this
improvement is not evident everywhere in the District. Reports
further suggest that the housing industry, and the construction
sector more generally, is continuing to make modest gains in both
construction and sales. Loan demand is steady generally, but with
residential mortgages doing better than other categories.
Expectations are neutral to positive. If there is any consensus, it
seems to be that improvement is on the way but not immediately,
perhaps in the second quarter.
The Manufacturing Sector
The past several weeks have been a mixed bag for Fifth District
manufacturing establishments. On balance, new orders, order
backlogs, the length of the average work week, and material
inventories declined slightly. Finished goods on hand and employment
were down broadly while shipments rose narrowly. Inventories and
current plant and equipment capacity remain well above desired
levels at a number of the establishments surveyed. Prices continued
generally stable, although several respondents report receiving
lower prices compared to last month.
There is no clear pattern of performance by industry or area. It appears, however, that the building materials and textile sectors may have done somewhat better than average while the primary metals group seems to have fared slightly worse.
Consumer Spending
Consumer spending appears to have strengthened in recent weeks
although there are spots of continued weakness. The strength that
exists appears to be primarily in general merchandise lines and, in
some cases, automobiles. There is little evidence of any pickup in
non-auto consumer durables.
One respondent suggested that retail activity had definitely picked up in his area, but that an unusually large portion of sales was for cash. Consumer credit activity, and particularly installment lending was not keeping pace. Another respondent remarked, however, that in his area sales continued weak and that consumer savings activity was up markedly.
Housing and Construction
The preponderance of evidence suggests that the housing recovery in
the District is continuing, but that the pace has moderated in the
past few weeks. It seems likely that inadequate allowance for
seasonal factors may be at fault. Most reports continue to indicate
the commercial and industrial sectors are much improved.
The Financial Sector
Lending activity, apart from residential mortgages, is showing few
signs of life according to our respondents in the financial sector.
Short-term business loans are stagnant and expected to remain that
way over at least the rest of the first quarter. The same is
essentially true for consumer lending except that there is some
expectation of a modest improvement over the near term.
Expectations
Looking out over the next six months, most of our respondents are
quite positive in their expectations. A large majority of
manufactures surveyed, for instance, expect improvement nationally,
locally, and in their respective firms over that period. Retailers
are less enthusiastic, but generally positive. The time frame
appears critical in these expectations. Respondents in the financial
sector foresee little increase in loan activity this quarter, but
look forward to a consumer and mortgage lending pickup in the April-June quarter. Even then, however, there is little expectation of
significant improvement in business lending.