Beige Book Report: Richmond
September 14, 1994
Overview
District economic activity grew more slowly in July and early August
than it had in June. Manufacturing and services sector activity
increased at a sluggish pace. Retail sales rose little. Activity in
housing was unchanged, and credit demand slackened. However, tourism
continued to strengthen, and commercial real estate activity picked
up. Price pressures were modest. In agriculture, crop conditions
improved, but producers were concerned about lower farm commodity
prices.
Consumer Spending
Respondents to a mail survey indicated that District retail activity
barely grew in July. Retailers reported that sales and wages rose
slightly, employment and shopper traffic changed little, and
inventories fell. Respondents reported that retail prices increased
0.3 percent in July. Looking ahead to the next six months, retailers
expected demand for their products to increase and their prices to
rise 1.0 percent.
Service-Producing Firms
Respondents to a mail survey of District service-producing firms
indicated that activity increased more slowly in July. Service firms
reported that revenues and wages were up slightly; employment
changed little, except for increases in the wholesale and health
services sectors. Service prices rose 0.1 percent in July. During
the next six months, respondents expected their prices to rise 0.6
percent and the demand for their services to increase.
Manufacturing
Factory activity grew more sluggishly in July according to a mail
survey of District manufacturers. Respondents noted smaller
increases in shipments, the volume of new orders, order backlogs,
and the average workweek. However, employment rose slightly in July,
and exports were up compared to six months ago. Manufacturers
expected shipments and exports to increase during the next six
months, but they anticipated little change in employment. Finished
goods and raw materials prices increased faster in July than in June
but continued to rise by less than the general inflation rate.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that tourist activity increased in August
compared to July and to a year ago. Respondents attributed the
increases to unseasonably good weather, better marketing, and a
greater-than-normal number of repeat customers. Most respondents
expected tourist activity to remain above year-ago levels for the
rest of the summer.
Ports
Representatives at the ports of Baltimore, Charleston, and Hampton
Roads (Norfolk) indicated that exports were lower in July than in
June, but imports were higher. Compared to a year ago, however, both
imports and exports were higher. Looking ahead, Baltimore contacts
expected exports to increase faster than imports during the next six
months, while Charleston and Hampton Roads contacts expected
activity to remain about the same.
Finance
During the past six weeks, consumer loan demand declined slightly,
and commercial loan demand remained steady. Interest rates on
consumer, commercial, and mortgage loans increased. Lenders
indicated that loan originations slowed and refinancing activity
remained unusually low.
Residential Real Estate
According to District realtors and builders, residential real estate
activity changed little during July and early August. Building
permits, housing starts, and buyer traffic were steady. Home sales
were unchanged, although some real estate agents reported an
increase in sales of lower-priced homes. Most contacts indicated no
impact on sales from recent mortgage rate increases. Home prices
were unchanged; lumber prices and construction wages were stable,
although the prices of nonlumber building materials rose.
Commercial Real Estate
District contacts reported that commercial real estate activity
picked up in August. Leasing activity remained strong and vacancy
rates declined further. One contact in Greenville, S.C., reported
that activity there was the strongest since the 1970s. Commercial
rents inched upward, except in Charleston, S.C., and in parts of
Maryland and West Virginia, where rents were unchanged. Contacts
reported new retail and office construction throughout the District.
Large discount stores continued to dominate retail construction, but
some shopping center construction was reported underway in Virginia
and the Carolinas. Some office construction was noted in Virginia
and West Virginia, and warehouse construction was reported in the
Carolinas.
State Revenues
State government revenue forecasters said July tax collections
suggested moderate economic growth in all District jurisdictions
except South Carolina, where real growth slowed, and the District of
Columbia, where real growth turned negative. Tourism- and leisure-
related tax collections were reported strong in several
jurisdictions.
Agriculture
Conditions in agriculture improved in recent weeks, according to
District farm analysts. Moderate temperatures and adequate rainfall
boosted the condition of most crops to good or excellent. Peach and
vegetable harvesting activity neared completion. Tobacco cutting was
well underway, and corn and sorghum harvesting had begun.
Preliminary yields indicated that most District crop harvests would
be large. Farmers expressed concern, however, about poor price
prospects for their crops.