Beige Book Report: Richmond
June 19, 1991
Overview
District economic activity in late May and early June was, on
balance, not much improved from the month before, but the attitude
of businesses about the near-term outlook remained optimistic.
Retail sales were lower and manufacturing activity was flat. Almost
no new commercial construction was started and housing activity was
lackluster. Sluggish growth in the volume of business loans was
attributed primarily to weak loan demand, although some supply
constraints were noted. On the brighter side, retailers and
manufacturers are optimistic about their prospects, export volume
rose at District ports and the outlook for the District's farming
sector appeared promising.
Consumer Spending
Our regular survey of retailers suggested that retail activity
declined slightly in the past month. Reports of lower sales --
including sales of big-ticket items -- outnumbered reports of higher
sales. Shopper traffic was slightly lower, as was retail employment.
Retail prices showed little change, even though wholesale prices
were reported to be somewhat higher.
Respondents were optimistic about retail activity over the next six months. About half expected shopper traffic and sales to increase, but only a small percentage anticipated any change in employment. Prices at the wholesale and retail levels were expected to rise.
Manufacturing
Responses to our regular survey of manufacturers indicated that
District factory activity remained stable. Manufacturers reported
almost no change in shipments, prices, export orders, capital
expenditures, and employment. New orders increased slightly, while
inventories and order backlogs decreased slightly. About two-thirds
of the responding manufacturers viewed poor sales as their single
most important problem.
Manufacturers remained optimistic about business conditions and their prospects for the next six months, although somewhat less so than in our previous survey. About half of the manufacturers foresaw increases in shipments, new orders, and order backlogs. Respondents anticipated slight increases in capital expenditures and export orders, but they expected little change in inventories and employment.
Port Activity
Representatives at District ports -- Baltimore, Charleston, and
Hampton Roads (Norfolk) --indicated that exports were higher and
imports were generally unchanged in May from April. Compared with a
year ago, export activity was higher and import activity was lower.
Exports are expected to increase faster than imports over the next
six months.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that tourist activity increased significantly
over the Memorial Day weekend compared with last year. Many beach
areas were reportedly booked to capacity while most other beach and
mountain areas experienced increases in bookings which they
attributed to the unseasonably hot weather. A majority of the
respondents expected tourist activity this summer to be above last
year's level.
Finance
District financial institutions contacted by telephone indicated
that the demand for commercial and industrial loans remained weak in
April and late May. Among businesses that requested loans, smaller
firms slightly outnumbered larger ones, and few new businesses
sought financing. Loan delinquency rates edged down.
We also asked retailers and manufacturers about credit conditions. A majority indicated that loan activity was sluggish in their respective areas. Most felt that a moderate number of creditworthy borrowers had been refused loans recently. Most also indicated, however, that loan demand was weaker.
Housing
Results from our survey of home builders suggested that housing
activity was mixed in recent weeks. The number of reports of
increases in housing starts about equaled the number of reports of
decreases. Although some builders noted an increase in sales, most
reported that sales were unchanged to lower. Low- and medium-priced
homes apparently sold better than high-priced homes. Nearly all
builders reported that home prices were steady. A few indicated that
credit conditions were stringent.
Nonresidential Construction
Commercial construction firms contacted by telephone noted few signs
of an upturn in nonresidential building. These firms reported that
little private commercial construction was underway and indicated
that much of their current work was public projects--bridges,
highways, and government buildings. Some respondents, however,
suggested that the decline in activity had bottomed out, although
none expected a strong upturn. The outlook in the Washington, D.C.
area was said to be especially uncertain. Several respondents
reported that industry profit margins were extremely thin and that
in some cases firms were bidding jobs at below variable costs.
Agriculture
Despite scarce rainfall and record high temperatures across much of
the District in late May, our contacts in agriculture indicated that
prospects were generally favorable as of the end of the first week
of June. The harvest of small grains and peaches was in progress,
and preliminary assessments indicated that yields for these crops
would be excellent. The spring planting of corn, soybeans, and the
transplanting of tobacco were nearing completion and were ahead of
last year's pace. The condition of most crops was good to excellent
with only scattered reports of heat stress and disease damage.