Beige Book Report: Richmond
June 22, 1994
Overview
District economic activity increased moderately in May and early
June. Tourism was robust, particularly over the Memorial Day
weekend. Manufacturing indicators and retail sales increased, but
service-producing firm activity rose only moderately and trade
volume through District ports changed little. Mortgage lending
activity declined although conditions in commercial real estate and
housing improved. Reports indicated scattered labor shortages and
some modest upward pressure on prices. In agriculture, spring
planting neared completion, but some crops experienced heat stress.
Consumer Spending
Respondents to a regular mail survey indicated that District retail
activity increased in May. Retailers reported gains in employment,
wages, and sales, including those of big-ticket items. Other
contacts, however, noted that auto sales weakened after April 15.
Survey respondents indicated that retail prices increased 0.4
percent in May and foresaw price increases of 1.1 percent during the
next six months. Looking ahead, retailers expected demand for their
products to strengthen in the coming months.
Manufacturing
A mail survey of District manufacturers showed increased factory
activity in May. Shipments, new orders, and employment were higher
in recent weeks. Finished goods prices increased slightly, and raw
materials prices rose by less than the general inflation rate.
Producers expected no change in employment, a longer average
workweek, lower finished goods inventories, and a slight increase in
prices during the next six months.
Service-Producing Sector
District service-producing firms indicated that activity increased
moderately in May. Revenues and wages rose, but employment was
steady. Respondents reported a 0.6 percent increase in the prices of
their services. They expected that in the coming months their prices
would rise 1.4 percent and demand for their services would increase.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated robust tourist activity in recent weeks. Over the
Memorial Day weekend, many beach areas were booked to capacity and
several reported record-setting activity. Other tourist areas also
experienced strong increases in bookings, which they attributed to
unusually favorable weather and a surge in group reservations. Based
on current bookings, respondents anticipated that summer tourist
activity would far exceed last year's level.
Ports
Representatives at the ports of Baltimore, Charleston, and Hampton
Roads (Norfolk) indicated that the volumes of exports and imports
remained about the same in May as in April. Compared to a year ago,
imports were higher and exports were unchanged. Baltimore and
Hampton Roads expected exports to increase faster than imports
during the next six months, but Charleston expected no change in
activity.
Finance
District financial institutions indicated that credit conditions
were mixed during the last six weeks. Interest rates rose on both
commercial and consumer loans. Consumer loan demand remained fairly
strong, but commercial loan demand declined slightly. Mortgage
lenders indicated that originations were relatively slow and that
refinancing activity virtually disappeared. Commercial and mortgage
loan officers were cautious but optimistic about loan demand in the
months ahead.
Residential Real Estate
According to District contacts, housing sales and building permits
were steady in April and May, but buyer traffic decreased.
Homebuilders indicated that they started fewer houses because of the
recent rise in mortgage rates and their uncertainty about future
rates. Home prices remained stable, although lumber prices and
construction wages increased. Some builders reported that non-lumber
materials prices also rose, but at a slower pace than in previous
months.
Commercial Real Estate
Commercial real estate improved further in recent weeks, according
to industry analysts. Office building vacancy rates fell in most
areas of the District, but were unchanged in northern Maryland and
in West Virginia. Commercial rents were steady, but contacts
expected slight increases in the near future. The availability of
large blocks of office space continued to tighten, particularly
around Charlotte and Washington, D.C. Some construction of office
buildings for owner/occupants was underway across the District, but
no new speculative projects were reported. Several contacts
indicated that renovations of older office buildings temporarily
lessened the need for new office building construction in their
areas. Large discount retailers continued to expand in North
Carolina, Virginia, and West Virginia, and demand for warehouse
space remained strong in northern Maryland and in Greenville, S.C.
State Revenues
State government tax revenues continued to grow at healthy rates in
most areas of the District. Based on May sales tax receipts, state
forecasters indicated that retail sales ranged from "good" in
Maryland to 'booming" in North Carolina. Analysts suggested that
overall revenue collections were consistent with real economic
growth rates of 2.5 to 3.5 percent, except in the District of
Columbia, where revenue growth was just keeping pace with inflation.
Agriculture
Unseasonably warm, dry weather in recent weeks aided farmers'
planting and harvesting activity but stressed some recently planted
crops. District planting activity was ahead of its normal pace, as
was the harvesting of wheat and other small grains in the Carolinas.
Early yields indicated that the small grain crop had not been
substantially damaged by the severe cold of last winter. Inadequate
soil moisture in many areas of the District, however, hampered the
development of corn, soybeans, and peanuts. In West Virginia, the
peach crop was in poor condition as a result of damage to orchards
from last winter's ice storms.