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Richmond: January 1993

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Beige Book Report: Richmond

January 21, 1993

Overview
District business conditions were mostly improved during the past six to eight weeks. Retailers reported increased activity for the Christmas season. Both manufacturing and port activity held steady from the previous period. Commercial and consumer loan demand increased slightly, while mortgage loan demand declined. Both residential and commercial real estate activity increased since early November. Some District crops were threatened by unusually wet weather.

Consumer Spending
Our regular mall survey indicated that District retail activity improved in December. Retailers noted increases in shopper traffic and sales, including sales of big-ticket items. Wages and prices at the retail and wholesale levels also rose. Survey respondents reported virtually no change in employment.

Retailers were optimistic about their prospects for the next six months. They expected shopper traffic, sales, wages, and prices to rise. They anticipated profits in the first half of 1993 to exceed profits in the same period of 1992. Few retailers expected major changes in employment in their companies or in their states.

Manufacturing
Manufacturers indicated that District factory activity held steady during the past month. Respondents noted little change in most indicators, although they reported small increases in shipments, capital expenditures, and exports. Respondents cited health care costs and government regulations as their most important problems.

Manufacturers were optimistic about their prospects for the next six months. Increases in all indicators were expected, and most anticipated a moderately lower unemployment rate in their states. Manufacturers also believed that profits in the first half of 1993 would be higher than they were in the first six months of 1992.

Ports
Representatives at District ports--Baltimore, Charleston, and Hampton Roads (Norfolk)--indicated that both imports and exports remained about the same in December as in November and when compared with a year ago. Exports were expected to increase at Charleston and Hampton Roads but to remain the same at Baltimore during the next six months.

Finance
District financial institutions contacted by telephone indicated that credit conditions were varied over the last six weeks. Respondents stated that commercial and consumer loan demand improved slightly. Rates on commercial loans were unchanged, while consumer rates were lower.

Mortgage loan demand was down significantly over the past six weeks. Weakness was reported primarily in refinancings. Mortgage loan rates fell slightly.

Residential Real Estate
Real estate analysts surveyed by telephone reported that the residential market continued to improve in most of the District during the past six weeks. Residential sales increased, while home prices were mostly steady. Several respondents suggested that higher consumer confidence spurred activity in their areas. Virtually all respondents were optimistic about real estate prospects in 1993.

The residential market in North Carolina, particularly in the Raleigh area, continued to be stronger than in other District states. Building permits strengthened somewhat in Greensboro, North Carolina, where the market has been weak for the past few years. In West Virginia, home sales continued to improve, particularly in Morgantown and the Charleston/Kanawha Valley area.

Commercial Real Estate
Commercial real estate activity increased in the past two months, according to our telephone survey of industry analysts. In some areas, vacancy rates were said to be dropping quickly. In other areas, brokers received more inquiries by businesses interested in obtaining space, and the financial condition of those making the inquiries was stronger than in prior months. The survey respondents attributed the improved conditions to increased business confidence. Most respondents said that demand was still insufficient in their markets to generate significant new construction.

Agriculture
Unseasonably wet weather continued to plague District farmers in December and early January. The harvesting of soybeans and cotton was delayed further, increasing the risk of yield losses. The wet weather assisted the emergence of small grains in the fall, but recently threatened to drown these crops in s areas. Livestock were also affected by the rains, because wet fields limited their ability to graze on small grains planted for winter forage.