Beige Book Report: Richmond
June 20, 1990
Overview
District business and financial conditions were generally unchanged
in May. Manufacturing activity softened somewhat, but manufacturers
remained optimistic about prospects for the national economy and
their own businesses. Retail sales changed little from April levels,
and tourism was mixed. On balance, exports rose at District seaports
while imports were unchanged. Housing starts fell, but home sales
remained stable. Home mortgage and home equity lending increased at
District financial institutions, but the demand for commercial and
industrial loans declined slightly. In the farm sector, planting was
ahead of schedule and the harvest of early grains had begun.
Manufacturing
Our regular mail survey showed that District manufacturing activity
apparently slowed somewhat in May from April. Although a majority of
respondents reported no change in shipments, inventories,
employment, new orders and unfilled orders, more respondents
indicated declines than increases—a reversal of the results of
our previous survey. Three-fourths of those surveyed reported no
change in new export orders, and most others indicated increases.
Manufacturers remained optimistic that expansion in the national economy would continue. More than 80 percent expect their own business activity to stay the same or improve along with the U.S. economy in the coming months.
Consumer Spending
Responses to our regular mail survey of District retailers indicated
that non-auto retail sales remained unchanged in recent weeks. There
was some additional inventory accumulation and a small decline in
shoppers, however.
A telephone survey of resort hotels in the District suggested that tourist activity has been mixed so far this spring. Half of the hotels reported increases over last year in their business through May and in their bookings for the summer. The other half, located mainly in Maryland and South Carolina, reported declines in tourism this year compared to last year.
Housing
A survey of District mortgage lenders, realtors and home builders
suggested that housing activity remained mixed in May. Lenders
reported that the demand for mortgage loans in May and early June
increased from the April level. They attributed the additional
activity to lower mortgage rates.
Realtors indicated that home sales in all price ranges during May remained at April levels. Housing sales in the District, although sluggish so far this year, have been above the pace of 1989 and realtors are optimistic that sales activity will pick up In the months ahead. Many potential home buyers, they said, are either waiting for their current homes to sell or for mortgage rates to decline further.
Most home builders contacted said they started fewer homes in May than in April. The new starts were targeted largely for the middle and upper price tiers of the market. May sales of new homes were depressed, the builders noted, and there is now a large inventory of unsold homes. Most builders complained about their difficulties in obtaining credit.
Port Activity
Exports rose in May from April levels at the seaports in Baltimore
and Charleston and stayed about the same at Hampton Roads. Imports
were higher at Hampton Roads, about the same at Charleston, and
lower at Baltimore. Compared to a year ago, port activity was mixed,
with increases in both exports and imports at Hampton Roads, no
changes at Charleston, and decreases at Baltimore. The Baltimore
port representative looks for exports to increase faster than
imports over the next six months, while representatives from the
other two ports expect export and import volumes to increase at the
same rate.
Finance
Reports from District financial institutions indicated that
commercial and industrial loan demand decreased slightly in May from
April. Respondents attributed the decline to borrower uneasiness
about economic growth, tax increases and interest rate changes. Some
lenders felt that potential borrowers may have perceived credit to
be unavailable, and several lenders said they were reluctant to make
loans because of stricter regulatory guidelines and the depressed
commercial real estate market.
Consumer demand for home equity loans remained strong in May. Over 90 percent of the bankers surveyed reported that the demand for home equity loans either remained at or increased from the April level. Lenders attributed the increase to marketing, seasonal factors and greater consumer awareness of the tax advantages associated with the loans. Over 85 percent of the lenders reported no recent change in the interest rates they charge on home equity and other consumer loans.
Agriculture
Farmers reported that soil moisture in late May and early June was
adequate to surplus in all District states except South Carolina.
Recent rains in South Carolina, however, relieved the dry crop and
pasture conditions in that state. In North Carolina, heavy rains
caused scattered flooding and damaged crops in some areas. Our
contacts indicated, however, that spring planting progressed faster
than normal despite the spring rains. In early June, corn and peanut
planting in the District was nearly complete and soybean planting
was well underway.
The harvest of small grains has begun around the District. Most small grain crops—oats, wheat, rice and barley—were reported to be in good condition and yields should be normal or above.