August 8, 1990
Overview
District business conditions generally weakened in recent weeks.
Tourism during the first month of summer was not as strong as in
past summers. Retail sales fell, but retail inventories were
essentially unchanged. Manufacturing activity softened, and
manufacturers' optimism about future prospects waned somewhat. Price
increases were widespread—for producer inputs and for wholesale and
retail merchandise. Activity at District ports was mostly unchanged.
Bankers reported lower interest rates and steady loan demand but a
decline in the quality of loan applications. In agriculture, crop
conditions improved and District lenders said they were seeking new
agricultural loans.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that summer tourist activity has been lower this
year than in the last several years. About two-thirds of the
respondents reported a decline in tourism while about one-fourth
noted little change. Respondents attributed the decreases in
activity to the mid-week July 4th holiday and the sluggish economy.
About half of those contacted said that their August bookings were
even with last year's while 40 percent reported declines. One-third
of the respondents expect tourist activity to decline in coming
months; one-fourth look for an improvement.
Retail
Responses to our regular mail survey of District retailers indicated
that sales in the first two weeks of July were slightly lower than
in the last half of June. About 40 percent of the retailers reported
that their sales were down while about one-third said they were
higher. Big ticket sales as a share of total sales slipped in early
July from June levels; 40 percent of the retailers reported declines
while four percent reported increases.
Prices of merchandise rose while inventory levels were mostly unchanged over the period. Almost half of the respondents reported that they had raised their prices in the past month, and nearly 60 percent indicated that they had paid higher prices for goods at wholesale.
Manufacturing
Our regular mail survey showed that District manufacturing activity
slowed in early July from early June. More respondents indicated
decreases than increases in shipments, new orders, order backlogs,
the length of workweek, and the number of employees. In our last
survey, these categories had been mostly unchanged. Inventories of
materials fell while inventories of finished goods rose slightly. On
a more positive note, new orders for exports rose somewhat.
When asked to indicate the most important problem facing their firms, more than half of the respondents identified poor sales. Poor sales seem to be particularly pronounced in the textile and furniture industries. One textile firm said weak sales had pushed profits down, and another noted that several textile plants had closed this year.
District manufacturers' views of current conditions in the national economy mirrored their own business activity. Almost two-fifths of the respondents said they believed economic activity in the nation had declined compared to a month ago. Looking forward, respondents remained optimistic but were somewhat less so than earlier this year. A majority still expect increases over the next six months in their shipments, new orders, the workweek, and new orders for exports. They look for backlogs of orders to be unchanged, but expect inventories of materials and of finished goods to shrink. Over one-third expect national economic activity to increase in the next six months while 27 percent look for a decline. In our June survey, however, 80 percent expected the nation's economy to turn up in coming months.
Ports
There was little change in port activity overall in the District.
Reports received from the three major District ports--Hampton Roads
(Norfolk), Charleston, and Baltimore--showed exports were higher in
June than in May at Charleston, lower at Hampton Roads and about the
same at Baltimore. June export activity was also mixed compared to a
year ago with shipments higher at Hampton Roads and unchanged at
Baltimore and Charleston. Imports rose in June from May levels at
Hampton Roads and Charleston but fell at Baltimore. June import
activity was about the same as a year ago at both Baltimore and
Charleston, but lower at Hampton Roads. Port representatives expect
the ratio of exports to imports to rise during the next six months
at Hampton Roads, fall at Charleston and remain unchanged at
Baltimore.
Financial
District financial institutions contacted by phone reported that
loan activity had been steady since mid-July. Slightly more
institutions reported increases than decreases in loan applications
since mid-July, and respondents expect their lending to pick up in
the weeks to come. Almost 40 percent of those contacted, however,
said that the quality of loan applications had fallen over the past
month, and only one respondent reported better quality applications.
Reductions in interest rates were reported by many respondents and most expect further reductions in the weeks ahead. Lower interest rates on loans were reported by 46 percent of the respondents and none reported higher rates. About three-fourths of those surveyed expect the rates they charge on loans to decline in the near future and none look for rate increases.
Agriculture
Widespread rainfall in July brought relief to District crops that
had been severely stressed by June's heat and drought. In most areas
crops were recently rated in generally good condition, although in
some parts of South Carolina they were still short of moisture.
Preliminary results from a July 1 survey of District agricultural lenders show that over three-fourths of the respondents were actively seeking new farm loans. Four-fifths of the respondents said that the availability of funds was greater than usual at their institutions, but 28 percent characterized loan demand as less than usual compared to eight percent who reported it to be greater than usual.