Beige Book Report: Richmond
March 14, 1990
District economic activity was mixed in February as it was in January. Sales of most retail goods rose, but not sales of new cars. Tourism was lackluster. The manufacturing sector rebounded somewhat after its January decline although furniture production remained depressed. Exports increased at District ports and imports were mixed. The demand for business loans was down and lenders were more cautious about making real estate loans. The agricultural sector survived a cold snap with little damage to crops.
Consumer Spending
Retail sales of general merchandise rose in mid-February as compared
with earlier in the month according to our regular mail survey;
however, department stores reported that sales of big ticket items
were flat. Most retailers expect sales to continue rising over the
next six months.
According to our telephone survey of automobile dealers and dealer associations, sales of new cars in February were below January and year-ago levels. Despite widespread manufacturer and dealer discounts, demand was depressed for all new models, foreign and domestic. Although new car sales were weak, nearly all car dealers said their inventories were now at comfortable levels. Some dealers said that sales of used cars were brisk.
Our telephone survey of hotels, motels, and resorts indicated that tourist activity this winter was about even with last winter's. Poor skiing conditions in some parts of the District were offset by good golf weather. Tourist areas throughout the District expect their business to be better than usual in coming months.
Manufacturing
Our regular mail survey of manufacturers, which registered declines
in virtually all measures of manufacturing activity in January,
indicated increases in shipments and new orders in February.
Unfilled orders, employment, and the length of the workweek,
however, were unchanged. Prices for raw materials rose at the same
moderate pace reported in January. Inventories of materials and
finished goods were largely unchanged.
In contrast to overall manufacturing activity, furniture output weakened further in February according to most of our respondents. Many plants shortened their workweeks, and at least two companies announced plant closings.
District manufacturers, including furniture producers, remain optimistic about prospects for growth in their businesses and in the nation during the next six months. Respondents who look for increases in shipments, new orders, unfilled orders, employment, and the workweek outnumbered those who expect decreases. About 60 percent expect their exports to increase in 1990 compared to the half who reported increases in 1989. Most of the producers believe national economic activity will expand or remain close to its current level over the next six months.
Ports
Representatives of the three major District ports -- Hampton Roads
(Norfolk), Charleston, and Baltimore -- indicated that export
activity was higher in February than in January while import
activity was mixed. Imports increased at Charleston, decreased at
Baltimore, and remained unchanged at Hampton Roads. All three ports
expect the volume of exports to increase more than the volume of
imports over the next six months.
Financial
The demand for commercial loans softened further in recent weeks
according to executives of District financial institutions. A few
respondents noted increases in the pace of business bankruptcies.
Some indicated that certain retailers, such as automobile and boat
dealers, faced financial difficulties.
Several business and financial executives called attention to the reduced supply of real estate loans. They said that pension funds and insurance companies had become more cautious in their lending for land development. They also said that many banks and thrifts had reduced or were seeking to reduce their real estate loan portfolios in order to increase other types of loans and investments and their capital. According to these executives, some of this increased caution in real estate lending is warranted in light of overbuilding in many urban areas, but some viable development projects cannot proceed because of a lack of financing.
Agriculture
A recent cold snap, which ended almost two months of unseasonably
warm weather, caused little damage to District crops. Apple trees
lost some blooms, but not enough to reduce production. Peach trees
were almost fully in bloom and suffered some damage in northern
parts of the District, but most orchards are located farther south
and escaped the brunt of the cold. Some damage also occurred to
blueberry and ornamental crops. Winter wheat growth has been far
ahead of normal and suffered no damage from the cold.