Beige Book Report: Richmond
March 23, 1983
Overview
Most available indicators of economic and business activity in the
Fifth District appear to have turned positive in recent weeks. At a
sample of manufacturing establishments new orders, shipments, and
order backlogs have all improved. The residential real estate sector
is also beginning to move with both sales and construction having
recently begun to show some vigor. Modest increases in retail sales
and in extensions of consumer installment credit are also evident.
Labor markets have generally firmed with strength in manufacturing,
construction, and agriculture overcoming the seasonal weakness in
the trade sector. Prices seem generally to have remained stable.
Expectations have improved dramatically since our last survey.
Manufacturing
There was broad improvement in business activity among District
manufacturers judging from our latest survey. Orders, order
backlogs, and shipments all rose across a wide range of firms and
industries. There were very few reports of declining activity.
Inventories were nearly flat as a slight increase in materials about
offset a minor decline in finished goods. A majority of respondents
find current stocks near appropriate levels, although total
responses suggest that, on balance, current stock remain somewhat
above desired levels.
Survey responses further suggest a turnaround in the manufacturing employment picture over the month. Both employment and the length of the average work week rose since the last survey, although more narrowly than orders and shipments. Several Richmond and branch directors noted instances of recalls or increase in high hirings in their respective areas. Current plant and equipment capacity remains well in excess of present needs, but there is little sentiment for changing existing expansion plans.
The strength described above appears to be developing rather generally across industries. To the extent that differences exist, primary metals and machinery and equipment are among the strongest with textiles not far behind. Paper producers appear to be among the least affected.
Consumption
The evidence from the consumer side is also positive. General
merchandise sales have continued to firm and apparently have begun
to get support from big ticket items. Retailers surveyed report a
relative increase in big ticket sales and our directors associated
with financial institutions have noted an increase in consumer
installment loans over the past few weeks. Retailers further report
inventories little changed and employment down slightly over the
month. Inventories are essentially in line with desired levels,
however, and the employment decline is largely seasonal.
Real Estate and Housing
Most indications are that in the residential real estate sector
activity is picking up rapidly in many areas of the District. Sales
of existing houses began improving shortly after year end and,
judging from reports on mortgage credit extensions, that improvement
is continuing. In addition, reports on construction employment and
building permits substantiate these recent gains.
Agriculture
Fifth District farm credit conditions in the fourth quarter of 1982
were highlighted by the continuing decline in interest rates and a
further rise in the availability of loan funds at banks. Farm loan
demand generally remained soft, and requests for loan renewals and
extensions increased. Farm loan repayment rates continued at a slow
pace, despite a modest improvement over a year ago. While liquidity
pressures on rural banks eased further, bankers maintained stiff
collateral requirements. Meanwhile, farmland values rose slightly
but remained well below year-earlier levels.
The Outlook
Perhaps the most noteworthy result of our latest survey concerns the
respondents' expectations. Respondents in both the retail and
manufacturing sectors are nearly unanimous in the expectation that
the level of business activity will improve over the next six
months. Higher levels of activity are expected at the national level
as well as at the respondents respective market and establishment
levels. There is apparently some concern within the business
community over the prospect of rising inflation, however.