May 4, 1988
Overview
The District economy made modest gains in March and prices rose
further. Retail sales appeared to increase at a somewhat faster pace
than in previous months, although big ticket items were steady. As
compared with our previous survey, a slightly smaller proportion of
retailers reported increases in the prices of their purchased
products and of the items they sell. Most manufacturing indicators
were higher in March, but shipments were steady to lower in early
April. Prices of manufactured goods and materials rose in March.
Housing activity remains relatively strong. Reports of seaport
activity indicated that exports grew faster than imports in March,
although both rose. Tourism was strong in the winter compared to a
year ago and is expected to remain robust throughout the spring and
summer. The agricultural and financial sectors were little changed,
although each demonstrated some signs of strength.
Consumer Spending
District retailers responding to our regular survey reported
somewhat higher sales in mid-April compared to March, with half
indicating higher sales and 30 percent indicating lower sales. About
half said their sales of big ticket items were unchanged while the
remainder was split evenly between those reporting higher sales and
those reporting lower sales. The majority of respondents expect
their sales to increase in the next six months.
Retailers continue to report price increases, although there was some hint of abatement in inflation in their reports for March. About one-third of our retail respondents increased their prices while 63 percent reported no change. In the previous survey, about 40 percent had reported increases while about half indicated no change. Moreover, 43 percent indicated that the prices of items they purchased had risen, compared with over half in the previous survey. Forty-four percent of our respondents expect to raise the prices they charge sometime in the next six months. The remainder expect to make no changes.
Manufacturing
Sizeable increases in March shipments compared to February levels
were indicated by respondents to our regular survey. Other
manufacturing indicators rose modestly. More manufacturers reported
increases than reported decreases in new orders, the backlog of
orders, and material and finished goods inventories. Employment and
the length of the workweek also reportedly increased slightly in
March.
When respondents compared manufacturing activity in the first half of April to late March, they reported that the more recent period was not as strong. For the first half of April, more manufacturers reported decreases in shipments than reported increases. Likewise, new orders and the backlog of orders were weaker over this period than in March.
The prices of raw materials and finished products rose further in recent weeks according to respondents. Sixty-eight percent reported they paid higher prices for raw materials in March and about one- fourth said they raised the prices of their finished products over the period. Three-fourths of the respondents look for further increases in the price of raw materials over the next six months.
Most manufacturers expect their business activity to increase in the next six months. Half of the respondents believe their shipments will rise during the spring and summer, as compared with 15 percent who expect declines. Increases are also expected in new orders. The majority of manufacturers plan to keep their inventories at current levels in the next six months.
Ports Reports received from the three major District ports—the Port of Hampton Roads (Norfolk), the Port of Charleston, and the Port of Baltimore—noted general increases in import and export activity for the month of March. Import shipments were higher at Hampton Roads and at Charleston but were reported unchanged at Baltimore. All ports indicated an upturn in export volume in recent weeks. When compared to a year ago, recent growth in export activity was outpacing that of imports.
Tourism
A telephone survey of resorts and hotels throughout the District
indicated strong tourist activity. The majority of the respondents
said that the winter convention season was good in their areas, and
they expect stronger activity this spring compared with previous
years. Summer bookings are running well ahead of last year. Only
one-fourth of respondents expect the decline in the exchange value
of the dollar to boost tourism this summer.
Housing
A special survey of District builders and realtors indicated an
upturn in activity in the District's housing sector. Realtors
reported that sales of single-family homes rose in March and
remained strong through early April. Starts of single-family homes
were also up in the period. Respondents noted continued strong
construction and sales activity in the homes priced in the higher
end of the market. A majority of respondents expect mortgage rates
to remain at current levels or to decrease slightly over the next
six months.
Agriculture
Preliminary results from a recent survey of District agricultural
bankers showed that farm financial conditions appeared to be
strengthening somewhat but were not yet robust. Farmland prices were
relatively stable in the first three months of this year, and 45
percent or the rural bankers expect farmland prices in their areas
to rise over the next three months. None expect land prices to fall.
Farm loan demand is higher compared to our survey three months ago,
but 20 percent of the bankers still characterize demand at their
institutions as below normal, while only four percent reported it as
above normal. Funds are reported to be readily available at almost
90 percent of the responding institutions, and only four percent
indicated that loans were refused due to shortages of funds.
Interest rates were reported to be lower across all agricultural
loan categories, but bankers anticipate farm loan demand will be
generally weaker in the coming three months.
Financial
The reports of executives of commercial banks and thrift
institutions indicated little if any change in banking activity
except in consumer loans. These loans, including home equity loans,
rose at a faster pace in recent weeks, although at least some of the
increase may have been due to seasonal factors. On balance, the
reports indicated that commercial loans and deposits were about flat
to up slightly.