Beige Book Report: Richmond
January 27, 1988
The District economy has apparently expanded further in recent weeks. Most of our directors and advisory council members reported that their local economies were robust at year-end, and our regular surveys showed a continuation of rising employment in retailing and manufacturing. Retail sales for the most part held up well through Christmas and retailers look for good winter and spring sales. Manufacturers reported generally strong activity and higher input prices, but they were somewhat less optimistic than they were a few weeks ago about their growth prospects. In other selected District sectors, financial institutions said they expect a pickup in some categories of loan activity, and most seaports reported increases in volume.
Consumer Spending
Most District retailers responding to our regular survey reported
that Christmas sales were above year-ago levels. However, 38 percent
of the respondents reported lower sales of big ticket items, while
43 percent reported no change. Additionally, nearly half of the
retailers said that post-Christmas inventory levels were higher than
last year's.
District retailers expect their sales to increase in the next six months. Sixty-five percent of those surveyed believe their sales will rise over the period, although about one-third expect weakness in big ticket items.
Manufacturing
Manufacturing activity in the District has apparently continued to
increase in recent weeks. Thirty-five percent of the respondents to
our regular mail survey reported increases in shipments - the same
percentage as in the previous survey. The survey results indicated
that orders, inventories of materials, and employment rose, while
unfilled orders and inventories of finished goods remained
unchanged, and the workweek declined slightly.
The percentage of manufacturers who expect shipments and orders to increase over the next six months were unchanged from the previous survey. In our two latest surveys, both conducted since the stock market crash, about 40 percent of the producers indicated that they believed their shipments and new orders would grow during the first half of the year, as compared to about 50 percent who anticipated growth before the crash. Most manufacturers plan to reduce their inventories of materials in the next six months, but most also expect their inventories of finished goods to rise.
The prices of both raw materials and finished products evidently rose further in recent weeks according to District manufacturers. Fifty-seven percent of the respondents reported higher raw materials prices and 32 percent reported higher prices for their finished products. Additionally, one-third of the respondents said they had been unable to obtain adequate supplies of some raw materials, particularly metals.
Reports from District manufacturers were somewhat less optimistic about the outlook for the general economy than about their own business prospects for the first half of 1988. Half of the respondents anticipated no change in the level of general business activity in the nation, while the remainder were equally divided between those expecting growth and those expecting contraction.
Mining
District coal production during the last weeks in December was
slightly ahead of production in the same period a year ago. However,
utilities have reportedly not been stockpiling much coal. The United
Mine Workers' contract expires on January 31, but coal industry
sources said that apparently utilities believe they can obtain
sufficient coal supplies from non-union companies if a strike
occurs. District coal production for 1988 is expected to remain at
1987 levels.
Financial
Fifth District financial institutions responding to our recent
survey reported little change in business conditions from a month
ago, and they remained optimistic about the months ahead. Seventy-
two percent expect the nation's rate of economic growth to increase
in the coming six months, and 64 percent look for increased economic
growth in their local areas over the same period.
Although executives of financial institutions reported little change in loan activity in recent weeks, they anticipate increases in the demand for home mortgage loans and for commercial and industrial loans in the months ahead. Rural bankers reported that their banks were doing well and had bright prospects for the future. These bankers also indicated declines in the number of financially troubled farmers and farm foreclosures.
Ports Representatives of the Port of Hampton Roads and the Port of Charleston, South Carolina—two of the three major District ports— noted general increases in both loadings and unloadings for the month of December. The Port of Baltimore, however, reported declines in imports and unchanged exports in recent weeks. All ports are expecting increased volumes in 1988.