Beige Book Report: Richmond
June 23, 1993
Overview
The Fifth District economy continued to grow at a modest, uneven
pace in May and early June. In some localities recent announcements
of possible District military base closings dampened growth. In the
District as a whole, however, retail sales edged higher while
manufacturing activity remained steady. Activity at ports was mixed.
Real estate activity rose with residential sales sharply higher in
most areas and commercial vacancy rates slightly lower. Despite
steady mortgage originations, overall loan demand weakened slightly.
Good weather helped farmers complete spring planting and assisted
hotel, motel, and resort bookings over the Memorial Day weekend.
Consumer Spending
Our regular mail survey indicated that retail activity was mixed in
May. Survey respondents reported that sales increased slightly, but
shopper traffic and employment declined. Wages, wholesale prices,
and retail prices rose. Retailers indicated little change in the
level of general business activity in their local areas.
Respondents were optimistic about the next six months. They anticipated Increases in sales and shopper traffic. They expected wages, prices, and capital expenditures to rise.
Manufacturing
Manufacturers indicated that District activity remained steady
during the past month. They reported little change in most
indicators. They noted decreases in order backlogs and inventories
and increases in finished goods prices. Manufacturers cited weak
demand as their most important problem.
Respondents were optimistic about their prospects for the next six months. New orders, shipments, and capital expenditures were expected to increase, but inventories and the number of employees were expected to decline. Respondents looked for order backlogs and employee hours to remain steady.
Military Base Closure List
Officials at local chambers of commerce reported that local business
activity had not dropped as a result of the announcement in May of
potential military base closures, but businessmen from the areas
indicated that increased job uncertainty associated with the
announcement had hampered growth. Nearly a dozen Fifth District
military bases were added to the list of possible closures. Many of
those bases, particularly those in eastern Virginia, are major
employers in their regions.
Ports
Representatives at District ports--Baltimore, Charleston, and
Hampton Roads (Norfolk)--indicated that imports rose in May compared
to April while exports fell. Measured against a year ago, imports
were generally higher and exports were generally lower. All three
ports expected exports to increase faster than imports during the
next six months.
Tourism
Hotels, motels, and resorts throughout the District indicated that
tourist activity in May and in the first week of June increased when
compared to April and a year ago. Respondents attributed the
increase to unseasonably good weather and to better marketing
strategies. Although most respondents reported that they were booked
to capacity on Memorial Day weekend, summer bookings were only
slightly better than last year. Despite slow summer bookings, most
of the respondents still expected tourist activity to improve during
the next six months.
Finance
District financial institutions contacted by telephone indicated
that over the last six weeks, commercial loan demand was marginally
lower while consumer loan demand strengthened somewhat. Commercial
and consumer loan rates were steady. Residential mortgage demand
fell somewhat during the last six weeks. Refinancing activity
declined sharply while new mortgage originations were steady.
Residential mortgage lending rates were flat.
Residential Real Estate
Real estate analysts and homebuilders surveyed by telephone reported
increased residential activity during the past six weeks.
Residential sales rose in all District jurisdictions except North
Carolina, and especially strong sales were noted for homes in the
lower price ranges. In North Carolina, the residential market
remained strong, but sales leveled off in Raleigh and weakened
slightly in Charlotte after posting particularly strong gains
earlier in the year. Residential sales in West Virginia continued to
grow substantially, drawing down the inventory of existing homes and
spurring new construction. Residential sales were said to be
especially strong around Morgantown. Home prices remained mostly
steady during the past six weeks, although realtors in some areas
reported slight increases.
Commercial Real Estate
Commercial real estate activity improved in most areas of the
District during the past six weeks but remained weak around
Baltimore. Office, retail, and industrial vacancy rates fell
somewhat in most metropolitan areas, especially in the suburbs.
Analysts in Washington, D.C. and Charlotte noted that large blocks
of class A space were relatively scarce in their downtown markets.
Virtually no speculative building was underway, but several
preleased office and industrial buildings were started.
Agriculture
Clear weather during most of late May and early June allowed farm
activity to progress at a faster pace. District farmers completed
their spring planting after having fallen behind schedule earlier in
the season. Crops were mostly in good condition, although severe
thunderstorms and hail had damaged the tobacco and corn crops in
southern Virginia and there were reports of insect damage in some
areas of the District. Haymaking and the harvesting of small grains
for forage were underway. Pastures and cattle were reported to be in
good condition.