Beige Book Report: Richmond
November 1, 1989
Overview
The performance of the District economy in late September and early
October showed little change from a month earlier, although the
impact of Hurricane Hugo was clearly evident. Retail sales, which
rose somewhat overall, were strong in some categories and weak in
others. Manufacturing activity was also mixed and about unchanged on
balance following a small increase in August. Most District
financial institutions reported steady loan demand. The tourist
industry expects a good fall season, with hotel and motel bookings
above those of last year, although hurricane damage and the
publicity surrounding it may have a negative impact in some local
areas in South Carolina. The District agricultural sector as a whole
should finish the year strong, despite considerable damage in the
Carolinas.
Consumer Spending
Our regular mail survey indicated that retail sales in the District
rose in the first part of October. Department store sales were up
after being flat in September, but sales of big ticket items were
unchanged. After increasing in September, car sales fell in early
October. Most retailers expect their sales to rise in the next six
months.
Manufacturing
Respondents to our regular manufacturing survey reported mixed
activity in September following a small increase in August. (Many of
our usual respondents from South Carolina did not respond to this
survey.) Shipments and new orders were up slightly, unfilled orders
and employment were down, and the length of the workweek and new
export orders were flat. Prices for finished goods and raw materials
continued to rise, but at a slower rate than in August. Inventories
of materials and finished goods were largely unchanged.
District manufacturers were somewhat more optimistic than in August about prospects for growth in their businesses in the next six months. Respondents who expect increases in sales, new orders, and employment outnumbered those who expect declines. However, more manufacturers anticipate decreases than increases in unfilled orders and the length of the workweek.
The effects of Hurricane Hugo on the industrial base of South Carolina and North Carolina appear to be small. Most textile plants were not located in the path of the storm, and we have no reports of damage to furniture plants, although Hugo traveled directly through some of the major furniture production areas of the Carolinas and Virginia.
Power outages did reduce industrial production somewhat. For example, furniture production in North Carolina, where about 25 percent of U.S. furniture is manufactured, declined about 1 to 2 percent during September. Pulp and paper production was also reduced somewhat by power outages and, apparently, because some logging roads were temporarily impassable.
Ports
Reports received from the three major District ports—Hampton Roads
(Norfolk), Charleston, and Baltimore—showed imports were higher in
September than in August at Hampton Roads and Baltimore, but were
lower at Charleston where the port was closed for five days because
of the hurricane. The export picture was mixed with shipments
slightly higher at Baltimore, lower at Charleston and about the same
at Hampton Roads.
Tourism
A telephone survey of hotels, motels, resorts, and divisions of
tourism indicated that tourist activity was above that of last fall.
About half of the respondents indicated increased activity while
about one-fourth experienced declines. About two-fifths of the
hotels and motels reported an increase in fall bookings when
compared to last year, and the remaining three-fifths saw little
change. Approximately two-thirds of the respondents expect tourist
activity in the coming months to be better than usual and none of
the respondents expect declines.
According to South Carolina's Division of Travel and Tourism Development, 85 percent of the hotels in the Charleston area have reopened. About one-third of the hotel business for the month was lost because of the hurricane. Fall bookings are about the same as last year.
Financial
A telephone survey of financial institutions indicated that demand
for commercial and industrial loans remained steady over the last
thirty days. Most lenders reported no change in the rate of loan
growth from a month ago, though a few reported slight increases or
decreases.
The demand for home mortgage loans appeared to strengthen in most parts of the District in the last thirty days, although reports from the Washington, D.C. area were mixed. Elsewhere in the District, a few lenders reported a slight downturn in mortgage loan activity, but the majority said that the demand for mortgage loans was at or above the levels of the previous month.
Agriculture
With the fall harvest nearly complete, yields for most crops appear
excellent. Recent rainfall across the District has not hampered
harvest activity substantially, but has caused delays in the fall
planting of small grains. Prospects for 1989 farm income generally
appear bright, though the impact of hurricane damage in the
Carolinas is not yet fully known. Farmland prices are reported to be
steady or rising in most areas of the District.
Hurricane Hugo did extensive damage to the agricultural sectors in both South Carolina and North Carolina. In South Carolina, USDA estimates total crop losses at roughly $80 million, with cotton, corn, and soybeans all hard hit. Structural damage totaled about $270 million. Estimates of livestock damage were incomplete, but thousands of head of cattle and hogs were reportedly destroyed, along with 2.7 million chickens and turkeys. Overall losses to the South Carolina farm sector are believed to be close to $1 billion.
In North Carolina, USDA estimates total crop losses were near $40 million, with corn accounting for about half of the total. Poultry industry losses were also approximately $40 million. Total damage is estimated to be in the vicinity of $175 million.