Beige Book Report: Richmond
September 8, 1993
Overview
The District economy continued to grow sluggishly during late July
and the first three weeks of August. Hot, dry weather boosted
tourism but dampened shopper traffic at retail outlets, pushed up
manufacturers' costs, and devastated crops. Credit demand
strengthened slightly as did residential and commercial real estate
activity. At District ports, exports fell but imports rose.
Consumer Spending
Our regular mall survey indicated that retail activity was mixed in
late July and early August. Respondents reported that sales rose
slightly, even though big-ticket items decreased somewhat. Wages
increased, as did wholesale and retail prices, while employment and
inventories were lower. Capital expenditures were reported to be
flat.
Survey respondents were optimistic about their prospects for the next six months. They expected increases in all indicators except sales of big-ticket items, which they believed would be unchanged.
Manufacturing
Our survey of manufacturers indicated that District activity
continued to hold steady in late July and early August. Respondents
indicated little change in most indicators, although raw materials
prices rose and new orders fell slightly. Manufacturers cited
government regulations and weak product demand as their most
important problems, and they noted that the summer's hot weather had
pushed up their production costs somewhat.
Respondents were optimistic about their prospects for the next six months. They anticipated increases in most indicators, but expected inventories and the number of employees to decline. They anticipated no change in backlogs and employee hours.
Tourism
Hotels, motels, and resorts throughout the District indicated that
tourist activity for July and the first three weeks of August was
higher than in June and a year ago. Respondents attributed the
increases to unseasonably good weather. All respondents noted that
their summer bookings increased when compared to a year ago, and
most expected tourist activity to continue to improve during the
next six months.
Ports
Representatives at District ports--Baltimore, Charleston, and
Hampton Roads (Norfolk)--indicated that exports were lower and
imports were higher in July than in June and a year ago. Hampton
Roads expected exports to increase during the next six months, while
Baltimore and Charleston expected export volume to be unchanged.
Finance
District financial institutions contacted by telephone indicated
that credit conditions improved slightly over the last five weeks.
Respondents stated that commercial loan demand was flat while
consumer loan demand strengthened somewhat. Interest rates were
steady on commercial loans and somewhat higher on consumer loans.
Residential mortgage demand increased during the past five weeks. Refinancing activity increased significantly, while mortgage originations were flat. Residential mortgage lending rates were moderately lower.
Residential Real Estate
Real estate analysts and homebuilders surveyed by telephone reported
that residential activity increased throughout the District during
the past six weeks. Residential sales and building permits rose on a
seasonally adjusted basis, as did home prices, particularly in the
Carolinas. Most respondents indicated that higher prices reflected
both higher building materials costs and stronger demand. Some also
attributed increased prices to a lessened availability of
residential lots and to increased regulatory and labor costs.
Commercial Real Estate
Commercial real estate activity was mixed during the past six weeks;
it improved in Virginia and the Carolinas, but remained sluggish
elsewhere. Office building and retail vacancy rates continued to
edge down, and no speculative construction was reported to be
underway. However, some analysts anticipated speculative office
building activity in some areas as early as next year. Commercial
rental rates remained steady throughout the District except in
Raleigh, where they were higher.
State Tax Revenues
State tax analysts reported that revenue growth implied real
economic growth of 2 to 3 percent in most District states. South
Carolina's economy appeared to be growing at a slower rate, partly
because of military cutbacks. In the District of Columbia, real
revenues continued to shrink.
Agriculture
Agricultural analysts reported that scattered rain across much of
the District in August brought relief to some crops but arrived too
late for others. Drought damage to corn, sorghum, and tobacco
reduced their expected yields substantially. The soybean and hay
crops benefited from the August precipitation but remained in poor
condition. As of late August, estimates of drought-related damage in
the District approached $600 million.