Beige Book Report: Richmond
August 10, 1983
Overview
The Fifth District economy is continuing to experience a broad based
expansion. Manufacturers are continuing to report gains in
shipments, orders, and order backlogs. Also, manufacturing
employment is reflecting this increased activity. Retail sales
remain relatively robust, particularly in big-ticket lines. Housing
construction and sales are generally holding at or near the vastly
improved levels of recent months, and there are scattered reports of
some resurgence in commercial construction activity. Principal areas
of concern are the export markets, particularly for textile
products, and the farm sector in light of recent adverse weather
patterns.
Manufacturing
Activity in the manufacturing sector continues to expand broadly.
Shipments, new orders, and order backlogs are generally up over the
past month and inventories have apparently continued to run off.
Manufacturing employment has also risen, as has the length of the
average workweek. Textile and furniture manufacturing appear to be
experiencing particularly rapid recoveries, although export markets
for their products remain very soft.
Manufacturing inventories and plant and equipment capacity appear generally satisfactory. There remains, however, little expectation of much capacity expansion this year. Capital spending, it is thought, will go to modernization and relocation, each with cost and/or labor saving objectives. Current distress points in District manufacturing are almost entirely older or less efficient plants that are being phased out of operation.
Consumer Spending
By and large, District consumers remain moderately active, although
much of the recent sales gains appears to have been concentrated in
big ticket items, particularly automobiles and durable goods
associated with purchases of houses. Furniture and appliances, in
particular, seem to be doing well. Otherwise, retail sales have been
moderate. There is some evidence that retailers, at least in some
cases, are continuing to allow inventory run off despite the
generally held expectation that sales will pick up as the recovery
progresses and reports that delivery times are beginning to stretch
out for some types of products.
The widely, though not universally, held expectation of continued growth in consumer spending is based largely on growing consumer confidence, improved consumer liquidity, and the belief that the recovery is still gaining momentum. The possibilities of a short- lived or very moderate recovery have not been ruled out, however, and could lead to little or no growth in sales, particularly of autos and other big-ticket items.
Housing and Construction
While remaining somewhat spotty, the housing sector is still a
bright spot in most parts of the District. Construction and sales
have continued strong although there are some signs of slowing
activity in recent weeks. Mortgage interest rates have increased
slightly in most areas in the past few weeks. Fixed rate mortgages
are still popular and reports are that the variable rate
instruments are not being received well by consumers. As a result,
there has been a tendency for mortgages to have shorter maturities
and higher down payments in return for lower rates. The markets
remain basically optimistic.
There are also reports of a resurgence of commercial construction activity in some areas, although these remain exceptions. Highway work is apparently providing a significant boost to the non- residential sector in some areas as well.
Banking and Finance
Loan growth appears to have been moderate recently. The greatest
strength has been in demand for residential mortgage and consumer
installment credit. In most quarters, this pattern of growth is
expected to continue for the rest of the year. Recent business loan
demand is generally described as more sluggish.
Agriculture
There is widespread concern over the prospects for the District farm
sector. Reduced acreages resulting from PIK program participation
combined with unusually hot, dry weather experienced of late are
giving rise to concert over the level of output of some crops and
over the potential availability of feed grains.