Beige Book Report: Richmond
August 3, 1994
Overview
Most sectors of the District economy grew moderately in June and
early July, although finance and residential real estate slowed
somewhat. Manufacturing and retail activity rose, and modest price
increases were seen in both sectors. Port activity and tourism
picked up. and commercial real estate activity was strong. Mortgage
originations and consumer lending, however, declined slightly.
Agricultural activity was at a normal level.
Consumer Spending
Respondents to a regular mail survey indicated that District retail
activity increased in June. Sales. wages. and shopper traffic rose,
but employment, big-ticket sales, and inventories changed little.
Survey respondents indicated that retail prices increased 0.3
percent in June, and they expected prices to increase 1.3 percent
during the next six months. They also foresaw increased demand for
their products in the months ahead.
The District's board of directors reported that retail sales-- especially sales of autos and building materials--generally were strong in their areas. They noted, however, that consumers continued to be price conscious and willing to shop at several stores before making a purchase.
Manufacturing
A mail survey of District manufacturers showed increased factory
activity in June. Survey respondents reported increases in
shipments, the volume of new orders, order backlogs, and the hours
worked per week. Despite increased factory activity, there was no
rise in factory employment. Capital expenditures were up compared to
six months ago. Manufacturers expected shipments and capital
expenditures to increase during the next six months, but they
anticipated no change in employment. Finished goods prices were
steady; raw materials prices increased, but by less than the general
inflation rate. Producers expected these price trends to continue
during the next six months.
Service-Producing Firms
Respondents to a mail survey of District service-producing firms
indicated higher revenues and wages in June. Employment changed
little, except for increases in the wholesale and health services
sectors. Service prices rose 0.2 percent in June, and respondents
looked for them to rise 0.7 percent during the next six months.
Respondents also expected demand for their services to increase.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that tourist activity in June and early July was
higher than in May and a year ago. Over the last several weeks, many
beach area hotels were reported booked to capacity; the Fourth of
July weekend was especially busy. Other beach and mountain area
hotels and resorts experienced increased bookings. All respondents
expected tourist activity for the remainder of the summer to be
above last year's level.
Ports
Representatives at the District ports of Baltimore, Charleston, and
Hampton Roads (Norfolk) indicated that both exports and imports were
higher in June than in May. Compared with a year ago, imports were
higher, but exports were unchanged. Baltimore reported that
warehouses were filling up because of increased imports but noted
that the weak dollar could soon shift activity from imports to
exports.
Finance
District financial institutions indicated that lending activity
slowed slightly during the last six weeks. Mortgage originations
declined somewhat, and refinancing remained weak. Consumer lending
also declined slightly, although it remained at a fairly strong
level. Interest rates on both mortgage and consumer loans rose.
Commercial lending remained weak, and rates were unchanged. Most
lenders were cautious about future loan demand and expected slow to-
moderate levels of activity through the summer.
Residential Real Estate
Real estate contacts reported steady buyer traffic but fewer home
sales in June and early July. Homebuilders said there were fewer
starts and building permits because of fears of future mortgage rate
hikes. Home prices were unchanged; lumber prices and construction
wages were stable, although the cost of other building materials
rose.
Commercial Real Estate
District contacts continued to report strong leasing activity in
June and declining vacancy rates, creating shortages of space in
some areas. The supply of newer office space was particularly tight.
The price of commercial office space continued to inch upward,
especially in suburban areas. Increased prices of newer space led
some businesses in Charleston, W.Va., to move to older, less
expensive buildings to save money. Financing for speculative
construction remained tight; however, real estate agents anticipated
new build-to-suit construction in some areas.
State Revenues
State government revenue forecasters said tax collections from June
suggested that economic growth in Maryland and South Carolina slowed
slightly but remained steady in the other states.
Agriculture
Crop and weather conditions were normal across most of the District
in recent weeks. Scattered rainfall brought relief to crops in many
areas, although some remained dry, and temperatures were above-
normal in others. Corn and soybeans generally were in fair-to-good
condition. Hay cutting was underway, and the harvesting of tobacco,
vegetable crops, and peaches was beginning. The small grains harvest
was nearly complete, and reports suggested good yields.