Beige Book Report: Richmond
December 5, 1985
Overview
Moat reports from around the Fifth District suggest that economic
and business activity remains quite strong. Seasonal factors are
causing some churning of employment activity, and special factors
much as the end of the automobile financing opportunities of late
summer and early fall are also causing some confusion. Nonetheless,
employment, retail sales, construction, and housing sales are all
reported, on balance, to be holding at quite high levels. Retail
sales seem to be running well ahead of national trends, with
experience varying significantly across product lines and regions.
District employment has drawn recent support from construction,
government, and to a lesser extent from manufacturing, sufficient to
offset seasonal losses in agriculture related areas and tourism
services.
Manufacturing
Manufacturing activity in the District, after leveling out in the
past few months, is showing some signs of trying to bounce off of
the bottom reached last summer. Several District states have
experienced manufacturing employment gains lately, and even where
employment shows continued weakness, average weekly hours of
production workers has tuned up sharply. The modest gains achieved
in the textile, apparel, and furniture industries a month ago are
being held, and in some cases even built upon. Some pickup in
textile and apparel exports has developed of late providing some
support for these industries, while in the furniture group, strong
retail sales are beginning to feed back into production gains.
Another encouraging note is found in the attitude of District
manufacturers concerning current inventory levels. Although there
does not seem to have been any significant change in current stocks,
present levels appear to be viewed as about right. For quite some
tine, most District manufacturers had found existing inventory
levels excessive.
Coal production continues to run behind last year's levels despite high rates of consumption and improved export demand. In the Fifth District, production for the year is running more than 5 percent behind 1984 levels (compared to about 3 percent nationwide), despite improved production in Virginia.
Consumer Spending
Consumer spending is reported to be making major gains around the
District. An important factor seems to be that automobile sales
continue strong, despite the end of the manufacturers' attractive
financing promotions. Car sales are down, to be sure, but remain at
what would normally be considered quite healthy levels. Spending
patterns in other product lines are being affected by seasonal and
weather factors. Warm weather in much of the District has put a
damper on sales of fall clothing, for instance. Most general
merchandise lines continue to move well, however, as do building
materials, food, furniture, and appliances.
Housing and Construction
The construction industry continues to lend considerable strength to
the Level of District business activity. Although recent changes in
the level of activity vary around the District, our impression is
that on balance construction has at least held its own over the past
several weeks, and may have even strengthened somewhat. In addition,
sales of houses, both new and existing, continue to be very strong
in most areas. In Virginia, for instance, single family dwellings
under contract in October were nearly 3 percent ahead of September,
and more than 21 percent ahead of October 1984. Year to date the
gain has been more than 13 percent.
The Financial Sector
Financial institutions report some pickup in consumer installment
loan demand since the end of the financing incentives offered by the
auto manufacturers earlier in the year. That pickup, however, is
generally described as slight. More generally consumer loan demand
is moderate, and relatively stable.