Beige Book Report: Richmond
May 4, 1994
Overview
Continued economic growth was indicated by increased activity in
manufacturing, real estate, agriculture, and in the service-
producing sectors, including ports and tourism. Trends in the
financial sector were less certain; mortgage refinancings declined,
but consumer and commercial loan demand remained fairly strong.
Upward pressures on prices were reported for manufacturers' inputs
and for building materials. Wages rose in the service-producing
sectors, and commercial rents increased in some areas.
Consumer Spending
Retailers in all District states reported improved business in
March. Employment changed little, but most other indicators were up.
Retailers expected consumer demand to increase in the next six
months. Respondents reported a 0.4 percent increase in retail prices
in March, and they expected prices to rise 1.1 percent during the
next six months.
Manufacturing
Our mail survey of manufacturers indicated increased District
factory activity in March. Shipments, new orders, and backlogs grew,
but employment changed little. Raw materials prices rose by less
than the general rate of inflation; finished goods prices were
steady. Several contacts doubted that production cost increases
could be passed along to purchasers. While most producers agreed
that cost increases were limited so far to raw materials, one
manufacturer noted that "price pressures were no longer dormant."
Manufacturers expected higher shipments and prices over the next six
months but little change in employment.
Service-Producing Sectors
Our mail survey of District service-producing firms showed increased
activity in March. All sectors reported increased revenues, and
respondents expected stronger demand in the next six months. All
sectors except wholesale trade reported higher wages. The real
estate and health services sectors reported increased employment;
all other sectors indicated no change. Respondents reported a 0.2
percent price increase during March, and they expected prices to
rise 1.0 percent during the next six months.
Ports
Representatives at the District ports of Baltimore, Charleston, and
Hampton Roads (Norfolk) indicated that exports were generally higher
in March than in February, while imports were unchanged. Compared
with a year ago, imports were higher and exports remained about the
same. All three ports expected exports to increase faster than
imports during the next six months.
Tourism
Tourist activity at District hotels, motels, and resorts was higher
in the first three weeks of April than in March or in April 1993.
Myrtle Beach noted that group bookings rose because of the increased
interest in golfing packages offered in that area. Almost all of the
respondents indicated that spring bookings were higher than a year
ago, and most respondents expected tourist activity to improve
further relative to year-earlier figures during the next six months.
Finance
District financial institutions indicated that credit conditions
were mixed during the last six weeks. Interest rates on commercial
loans increased faster than did rates on consumer loans. Loan demand
remained fairly strong. Some commercial lenders noted that a few
businesses were delaying new projects because of interest rate
uncertainty, but most commercial and consumer lenders were
optimistic that demand would remain relatively strong, given current
rates. Mortgage originations were steady, but refinancing activity
fell substantially as residential mortgage rates rose. Mortgage
lenders were cautious about future loan demand because of their
fears of further rate increases.
Residential Real Estate Housing
Our contacts reported that District residential real estate activity
remained strong in late February and March. Improved home sales were
attributed to an improving economy. Most real estate agents
indicated no discernible negative effect on sales from recent
mortgage rate increases, though they observed heightened uncertainty
among buyers. Most homebuilders indicated that housing starts were
slightly fewer than expected during the period, and some attributed
the slower pace to higher mortgage rates. Home prices changed
little, and lumber prices rose only slightly, although prices of
other building materials increased sharply.
Commercial Real Estate
Commercial real estate contacts reported declining vacancy rates
throughout the District. Demand for space was especially strong in
North Carolina, and contacts in Charlotte and Raleigh indicated that
shortages of space might occur soon. Contacts reported little new
construction in most areas, although some speculative warehouse
construction was underway in the Carolinas. Rental rates increased
in North Carolina and in parts of West Virginia, while rents in
other states remained unchanged. Charlotte contacts predicted larger
rental rate increases in 1995; some Raleigh contacts, however,
speculated that rent increases might end in 1995 with the addition
of new space. Large discount retailers continued to dominate retail
leasing except in Charlotte, where contacts noted increased leasing
by smaller shops.
State Revenues
State governments' March revenues suggested reasonably strong
economic growth across the District. North Carolina's revenue growth
remained strongest; the District of Columbia's was weakest, though
inflation-adjusted revenue growth there was no longer negative.
Several states reported very strong retail sales, particularly of
automobiles.
Agriculture
Generally favorable weather assisted farmers with their spring field
work. Corn planting progressed at an above-normal pace across the
District. Field preparation for soybean, tobacco, and peanut
planting was also reported to be ahead of schedule. Cattle had been
put into pastures, which were in generally good condition. Farmers
were optimistic that the hay crop would be sufficient to replenish
the stock depleted as a result of last winter's severe weather. The
peach crop was in fair-to-poor condition. On a pessimistic note, dry
weather was reported in eastern South Carolina.