March 18, 1992
Overview
Most sectors of the District's economy improved modestly in late
January and in February, in contrast to the sluggish conditions
reported in mid-January. Retailers noted a rise in sales and in
spending by tourists, and factory activity apparently increased
modestly. Most retailers and manufacturers were optimistic that
business conditions would improve further in coming months. Realtors
reported a rise in home sales which they attributed to a combination
of lower interest rates and improved consumer confidence. In the
financial sector, lending and interest rates were steady. District
port activity rose, mainly because of higher imports, and farm crop
prospects were good.
Consumer Spending
Our regular mail survey indicated that District retail activity
improved in late January and in February after having been unchanged
in December and early January. Survey respondents reported increases
in most indicators of retail activity, although sales of big ticket
items were flat and retail employment apparently declined. Most
retailers reported that factors other than this year's low interest
rate environment had helped profit margins and sales; one in three,
though, believed that the decline in rates had helped business.
Retailers continued to be optimistic about their prospects over the
next six months. They expected activity, particularly sales and
shopper traffic, to increase.
Manufacturing
Manufacturers indicated that District factory activity improved
somewhat in past weeks, in contrast to the decline reported in the
previous survey period. Respondents reported increases in shipments,
new orders and exports. They noted little change in most other
indicators, and inventories apparently declined somewhat.
Manufacturers indicated that, besides poor sales, excess capacity
was their most important current problem. About two-thirds of the
respondents said that lower interest rates had not boosted their
profits or sales significantly so far in 1992.
Manufacturers gave optimistic forecasts for the coming months. They expected all indicators of production and sales to improve, and thought that their inventories would be stable.
Ports
Representatives at District ports--Baltimore, Charleston, and
Hampton Roads (Norfolk)--indicated that exports were unchanged and
imports were higher compared with early January and with a year ago.
They expected export activity to increase somewhat over the next six
months and import activity to be flat.
Tourism
Hotels, motels and resorts throughout the District reported by
telephone that tourist activity in February remained unchanged
compared to early January and to a year ago. Most respondents
reported that bookings were about even with a year ago. Tourism was
helped by a good ski season and strong convention bookings. Over
half of the respondents expected activity to strengthen throughout
the remainder of the winter and into the spring.
Finance
District financial institutions contacted by telephone indicated
that credit conditions were mostly unchanged over the last eight
weeks. On balance banks reported the demand for consumer and
commercial loans was stable. Respondents stated that interest rates
on commercial loans at their institutions were steady, but rates on
consumer loans were lower. Respondents said that demand for home
mortgage refinancing trailed off over the last eight weeks as
mortgage interest rates rose. They noted, however, that the home
mortgage sector continues to be the strongest single source of loan
activity.
Real Estate
A telephone survey of real estate analysts and mortgage bankers
indicated increased activity in the residential market since mid-
January. Home sales and customer traffic increased and many
respondents suggested that these increases were due to lower
mortgage rates coupled with higher consumer confidence. Home prices
remained mostly steady, although some respondents suggested that
prices for upscale homes weakened in their areas. Commercial real
estate activity remained flat in most of the District, although
increased leasing activity was reported in the Carolinas.
Agriculture
Agricultural analysts across the District reported that farm
conditions remained strong in January and early February. Mild
winter temperatures and abundant precipitation had left small grain
crops in generally good condition. Winter planting preparation was
on schedule, and the seeding of tobacco and the planting of potatoes
was underway. In the livestock sector, feed and hay supplies were
expected to be adequate for the remainder of winter and through the
spring.