Beige Book Report: Richmond
September 16, 1985
Overview
What movement there has been in the District economy in recent weeks
has been toward strength. But it is not yet clear that any
broadbased improvement in activity is underway. Employment generally
continues to show moderate growth, but with only spotty support from
the manufacturing sector. Even that limited support represents
improvement from earlier in the year. Early results suggest that
August may have shown the first gain in manufacturing shipments
since April, and that the slide in new orders may have been
arrested. Retail activity also continues mixed, but upbeat reports
are somewhat more common there as well. Commercial construction
activity remains strong, although month-to-month gains are
undoubtedly down somewhat. Residential construction and sales, on
the other hand, are nearly uniformly strong, showing substantial
month over month, and year over year gains in recent weeks, The
agricultural economy in the District remains under stress, with
preliminary estimates showing farm income below year ago levels,
primarily as a result of weak commodity prices.
Manufacturing
Manufacturing activity is showing somewhat more life than in early
summer. Overall, shipments apparently rose somewhat in the latest
month, and the protracted slide in new orders seems to have ended,
or at least paused. In addition, there have been some employment
gains in the sector of late. Continued job losses in the textile and
furniture groups have been more than offset by gains in such areas
as building materials, machinery and equipment, electrical
equipment, glass, and metals. Inventories generally remain above
desired levels, having shown little change over the past several
weeks. Manufacturers around the District are reportedly seeing
almost nothing in the way of price changes, either for goods bought
or sold.
The situation is basically unchanged in the coal producing sector. Output continues to lag behind last year's level, and employment is down even more. Nonetheless, consumption, particularly in the utilities sector remains strong, and inventories are down. The outlook for production remains positive.
Consumer Activity
Retail sales activity is mixed according to latest reports, but even
that assessment represents an improvement from early summer. In some
areas and in some product lines, consumer activity apparently picked
up quite sharply in August after several months of very weak
activity. Most respondents find sales to have varied across product
lines, however, and apparently, there Is some regional variation as
well. In some areas sales remain below normal after adjustment for
seasonal factors. Inventory levels are not widely thought to be a
cause of concern.
Housing and Construction
Activity in commercial construction continues to be one of the
bright spots in the District economy, although there appears to be a
little room for further immediate expansion in this sector. Recent
gains have been substantial in the residential construction sector,
however, and sales of houses are such that there is little concern
about bringing new units on line. Conditions in the housing sector
generally are characterized as strong to "feverish."
The Financial Sector
Lending activity remains relatively strong, although there is little
reported evidence of any excesses developing in any sectors. There
are isolated reports of individual financial institutions ruining
somewhat higher than desired loan-to-deposit ratios, but it is
clearly not a generalized phenomenon. Residential mortgage markets,
of course, are showing considerable activity.
Agriculture
Along with deteriorating prospects for farm income, weakness in
farmland prices is becoming more severe. Agricultural bankers in the
District reported a 17 percent decline in farmland prices over the
last year. These conditions are reflected at District agricultural
banks where loan repayment rates remain very sluggish and
restructuring of agricultural debt is commonplace. In addition,
bankers are pessimistic concerning the short term outlook, and
expect additional financial problems this winter as farm bills come
due and income levels remain weak.