Beige Book Report: Richmond
May 18, 1983
Overview
A broadly based economic expansion appears to have gotten underway
in the Fifth District in recent weeks. In the manufacturing sector,
shipments and new orders rose across a wide front. Order backlogs,
employment, and the average work week also increased among
manufacturers. District retailers also report gains in activity over
the month, with sales and relative sales of big ticket items having
both increased. In addition, the construction industry has begun to
gain support from the housing sector, at least in the metropolitan
and resort areas. The outlook among District businesses is generally
positive. Prices remain relatively stable. Inventories, despite
modest recent increases, are at comfortable levels.
Manufacturing
Gains in shipments, orders, and order backlogs have been widespread
among Fifth District manufacturers in recent weeks. Most industries
appear to be sharing in these gains, but some, like textiles and
furniture, seem to be leading the way. Also, these recent gains are
beginning to affect the production side. Manufacturing employment
edged up over the month, while the length of the average work week
rose across a broad front. Stocks of materials were up slightly, but
finished goods on hand held steady. Nonetheless, total inventories
seem to be very nearly in line with desired levels. Current plant
and equipment capacity, however, remains somewhat in excess of
present needs.
Consumption
Most evidence points to a fairly substantial rebound in consumer
spending since our last survey. Sales appear to have advanced
broadly in most areas, although some rural areas appear to be
lagging in this respect. Retailers experienced increases in sales
and in relative sales of big ticket items over the month. Our
directors also note improved levels of consumer activity in most
areas. The most widespread gains appear to have been in autos,
although other durables and non-durables have also done well.
Furniture and appliance lines are getting support from both primary
and replacement markets. Activity in the housing sector has picked
up sharply in some areas so that builders and new owners are
actively furnishing new or recently purchased houses.
Despite the increase in sales, retail inventories are reported to have risen slightly in the past few weeks. Nonetheless, total stocks are well in line with desired levels. The feeling appears to be that retailers will continue to maintain very trim inventory positions, at best allowing their growth to keep pace with sales.
Housing and Construction
Fifth District construction and real estate activity continues to
vary widely from sector to sector and from region to region. To the
extent that it is possible to generalize, housing construction and
sales appear much improved in the metropolitan and resort areas. In
most other areas of the District, with only a few exceptions, the
residential sector continues sluggish to severely depressed. There
is generally thought to be very little inventory of new, finished
homes and prices are characterized as stable to firming. By and
large, current construction in the commercial sector consists of
projects in their later stages. There appears to be little work in
the pipeline. Estimates of the time before any pickup run generally
in the 6-12 month range.
Materials prices are coming under upward pressure and in some cases, e.g., lumber, have risen substantially. Wages, on the other hand, are generally stable, and have been for some time. On balance, construction costs would not appear to be in for any major shocks originating within the District.
Banking and Finances
Business loan demand has been flat to slightly declining recently
while consumer demand has been stable to slightly rising. Mortgage
rates have generally declined to the 12-13 percent range and
activity is up significantly. There is a feeling that current
mortgage rates will permit a modest but sustainable recovery in
housing sales and construction.
Most depository institutions seem to feel that total MMDAs consist of about 10-50 percent new money.
Agriculture
District farm credit conditions during the first quarter of 1983
remained much the same as in the previous quarter but showed signs
of slight improvement over the situation a year ago. Further
declines in interest rates and continued improvement in bank fund
availability highlighted conditions for the second consecutive
quarter. By and large, liquidity conditions at rural banks eased
again, while farm loan demand remained soft. Both loan repayment
rates and requests for renewals took a modest turn for the better,
compared with those a year earlier. Farmland values increased for
the second quarter in a row, rising moderately over the revised
previous-quarter level but remaining under a year ago.