August 7, 1991
Overview
District economic performance was mixed from June through mid-July,
and some of those surveyed expressed concern over the evidently slow
and uneven pace of the recovery. Manufacturing improved, but
retailing and commercial lending apparently did not, and no
improvement was seen or expected in commercial real estate. Most
state budgets had been balanced; at the time of the survey, however,
South Carolina and the District of Columbia were still revising
their spending plans. Agricultural conditions remained favorable,
though inadequate rain threatened crops in some parts of the
District.
Consumer Spending
Our regular survey of retailers indicated that business slowed in
the past month. Most retailers noted declines in their sales and
shopper traffic, as well as in their inventories, employment, and
capital expenditures. Their wages and prices rose somewhat.
Despite slower current activity, respondents were optimistic about the business outlook for the next six months. Most expected general economic conditions to improve locally and nationally, and they also expected a rise in their own sales and shopper traffic. Wholesale and retail prices were also expected to rise.
Manufacturing
Our regular mail survey of manufacturers indicated that District
factory activity improved slightly in July. Manufacturers reported
stable to higher levels of shipments and new orders. Inventories and
order backlogs apparently fell, while other business indicators
remained steady.
A majority of manufacturers foresaw improvement over the next six months in national and regional business conditions and increases in their own shipments, new orders, and prices.
Economic Recovery
We asked our manufacturing and retailing respondents if they thought
the recession was over. Nearly half of the manufacturers believed
the recession had bottomed out--both for themselves and for the
economy as a whole--while less than a fourth thought it had not.
Retailers had mixed feelings about whether general economic recovery
had begun; almost half believed that the retail sector was still in
a downturn, while less than a third thought the downturn had ended.
Port Activity
Representatives at District ports--Baltimore, Charleston, and
Hampton Roads (Norfolk)--indicated that exports rose and imports
fell in June from May and from a year earlier. Exports were expected
to increase faster than imports throughout the remainder of the
summer and fall.
Those surveyed thought that the declining dollar had boosted exports. Hampton Roads reported stronger exports of higher-valued items -- such as industrial machinery -- to Northern Europe. Coal exports rose at both Hampton Roads and Baltimore.
Tourism
A telephone survey of District hotels, motels and resorts indicated
that tourist activity remained flat in July despite some reports of
a strong July 4th. A majority of respondents expected tourism to
remain lackluster for the rest of the summer and into the fall.
Finance
District financial institutions contacted by telephone indicated
that the demand for commercial and industrial loans weakened
slightly in June and early July. Few new businesses reportedly
sought financing. Loan delinquency rates evidently edged down.
State Budgets
According to a telephone survey of state budget forecasters, four
Fifth District states entered the new fiscal year with their budgets
balanced. South Carolina was in the process of revising its spending
plans in response to new revenue estimates. West Virginia had no
shortfall going into the new fiscal year, and the other states
corrected their shortfalls by either reducing spending, increasing
taxes or a combination of both. The District of Columbia's fiscal
year ends September 30 and some revenue shortfall remained when the
survey was taken. Further budgetary actions were expected, including
possible D.C. government employee layoffs.
Housing
A survey of homebuilders suggested that the housing market was
steady in recent weeks. Builders reported little change in starts
and most indicated that sales were flat or slightly up, with low-
priced and medium-priced homes selling best. Inventories of unsold
homes reportedly fell. Nearly all builders said that home prices
were steady, despite a rise in lumber prices. Most expected no
improvement in housing activity over the next few months.
Commercial Real Estate
Real estate contacts said that District commercial construction had
come to a standstill. Weakness was especially pronounced in the
Washington, D.C. area, where prospects for an upturn ware termed
poor because of high vacancy rates. In other large cities,
commercial real estate markets were sluggish--though less than in
Washington--and problems were even less severe in smaller District
cities.
Agriculture
Conditions in the District's farm sector were generally favorable,
according to analysts contacted, but hot and dry weather conditions
in Virginia and Maryland threatened crops. Throughout the District,
the planting of soybeans and the harvesting of small grains were
almost complete. The condition of soybeans, corn, pastures, fruits
and vegetables was reported to be good in most areas. Tobacco
marketing was underway with both production and prices reported
strong. In Virginia and Maryland, hot temperatures and scarce
rainfall had begun to stress crops. Corn, soybean, and peanut yield
prospects were beginning to dim, and the crops faced severe damage
if adequate rain were not received soon.