May 13, 1981
Overview
The latest survey of Fifth District business conditions provides
some evidence that activity has rebounded somewhat over the past
month. Both manufacturers and retailers report stronger conditions
as compared with a month earlier. In the manufacturing sector the
volume of new orders jumped sharply, shipments rose slightly, and
order backlogs were unchanged. Retailers report fairly widespread
gains in total sales and further relative gains in sales of big
ticket items. Retail inventories and manufacturers' stocks of
finished goods were up generally, while materials on hand held
steady. Price increases, while still widespread, appear to have
moderated over the month. In general, the tone of expectations is
positive. Few survey respondents expect activity to decline in
coming months.
Consumer Spending
Survey respondents from the retail sector report a decided pick up
in sales over the past month. Sales of big ticket items appear to
have contributed significantly. Auto sales, in general, have
improved in recent weeks, but from severely depressed levels, and
continue abnormally soft. Richmond directors, however, are not at
all optimistic about the near term future of consumer spending.
Citing such reasons as consumers being generally spent out and over-
extended, they expect and in some cases already perceive a slowdown
in spending. Retailers, on the other hand are generally optimistic.
Most expect activity, nationally, locally, and in their respective
firms to improve in coming months. Among retailers surveyed
inventories rose over the past month while employment was unchanged.
Inventories are basically in line with desired levels and there is
no sentiment for increasing the number or size of outlets.
The Manufacturing Sector
Over one-third of our manufacturing respondents experienced
increased order volume in the past month. Shipments were also up, on
balance, and order backlogs were steady. Finished goods on hand
increased but there was no change in stocks of materials. Overall,
inventories remain about right to somewhat higher than desired.
There is a growing feeling that current plant and equipment capacity
is greater than required under the circumstances. Current expansion
plans are characterized as about right. The recent pickup in
activity appears to be fairly evenly distributed among industries.
Performance at textile manufacturers was perhaps somewhat stronger
than average, while the furniture industry continues weak. The
pattern does seem to vary geographically according to responses of
our directors. In some areas industrial activity appears
surprisingly strong, particularly those areas where textile
production predominates. Neither employment nor the length of the
average workweek showed any significant change over the latest
survey period. Nearly half of the manufacturers responding expect
activity to improve over the next two quarters. Very few anticipate
any worsening of activity nationally, locally or at their individual
establishments.
Housing and Construction
Conditions in the housing sector, and in construction generally,
remain mixed. Reports from several areas suggest some recent
improvement in sales of houses and in residential construction. One
Branch director finds real estate volume to have increased
dramatically in the last few weeks. Other areas continue to
experience a dearth of activity in both sectors. Commercial and
industrial construction appears quite strong, but much of this
strength is attributable to a small number of sizable projects in various stages
of completion. The impression remains, however, that, on balance,
the construction industry in the District is doing moderately well.
The Financial Sector
In general, loan activity appears to be firming moderately although,
as in the real sector, activity is spotty and individual reports are
not all consistent. Commercial and industrial loans are reported to
be expanding at a very moderate, but steady pace. Consumer loan
demand is spotty, but most indications are that installment loans
are also expanding generally. Auto loans appear to be up in most,
but by no means all, areas. Much the same is true of the real estate
sector. On balance, residential real estate lending is up, but there
remain pockets of virtually no activity. There is some
acknowledgment that private financing is displacing traditional
mortgage lending so that the level of the latter understates sales
activity in the real estate sector.
Specific Areas of Interest
The effects of the coal strike, significant because of the size of
the industry in the District, have so far been confined to the coal
industry itself. At some point it is expected that those effects
will spread. The duration of the strike is a major question at this
time. Agricultural areas are still in dire need of rain. Rains of
the past few days have helped, but much more is needed to restore
necessary soil moisture levels.