August 6, 1984
Overview
On balance, activity in the Fifth District is continuing to expand,
rapidly in some areas and sectors. Nonetheless, there are also
emerging signs of moderation in some industries as pipelines fill up
and import competition remains strong. Drawing strength from
construction, trade, and seasonal services, total employment is
reaching record levels in parts of the District. Residential and
commercial construction continue robust, although there is evidence
of slower speculative building of residential units, and the major
gains in total residential activity appear to be past. Coal
production is running very strong in the District. Ports activity is
setting records as a result of import volumes. Tourist activity is a
mixed bag as some areas are having disappointing peak seasons. The
quarterly survey of agricultural credit conditions revealed that the
financial health of District farmers has improved somewhat of late.
Manufacturing
Overall, the manufacturing sector is continuing to make healthy
gains in employment and output, but there is significant disparity
within the sector. The strength is almost entirely in durable goods
and building materials, and largely in the capital and industrial
goods portions.
Even within the nondurables, however, there is significant variety. The paper industry has been operating at near capacity for some time, so gains have been restricted. The textile and apparel industry, on the other hand, may be giving ground as inventory building appears to have run its course and import competition continues to intensify. There are also scattered reports of some slack developing in the furniture industry. If accurate, these reports probably reflect slower inventory accumulation rather than weakening final sales.
Housing and Construction
Construction activity continues generally buoyant around the
District. Commercial and industrial construction is showing strength
at nearly every stage along the pipeline, and the projects now in
progress should sustain the industry for a good while. Residential
construction is also holding on to recent gains in most areas. There
are reports, however, that house sales have slowed in recent weeks
and that speculative building has dipped as builders have grown more
cautious. The overall impression of the residential sector is,
nonetheless, one of vigor.
Consumption
Nearly all available information points to further gains in consumer
spending activity in recent weeks. Sales are rising nearly across
the board, from apparel and general merchandise lines to furniture,
appliances, and automobiles. Gains in consumer installment credit
outstanding are still quite substantial.
Despite the appearance of great confidence and enthusiasm on the part of consumers, some areas which rely heavily on tourism have found summer business disappointing thus far. Such disappointment is by no means uniform across the District, however. In fact, analysis of the experience of various areas suggests that perhaps tourists and vacationers are venturing farther from home, at the expense of the areas favored during recent periods of recession and concern over gasoline prices and supplies. Tourist-related businesses in the more remote areas seem much more pleased with their experience this season.
Agriculture
Good weather conditions throughout the Fifth District have brought
optimism to farmers and agribusiness establishments this summer.
Barring a collapse of farm commodity price levels as harvest time
approaches this fall, farm cash receipt levels should rebound
sharply from the drought affected levels of last year. Problems do
remain in the agricultural sector, however, with uncertainty
surrounding the future of tobacco farmers, weakness in some
livestock prices, and higher interest rates dampening the optimism
arising from the summer's abundant rainfall.
A survey of Fifth District bankers has indicated that financial stress, as measured by foreclosures and/or liquidations of farm assets are well within "normal" levels, indicating that strength is returning to the agricultural economy.
Banking and Finance
With consumer and business lending both expanding at recent rates,
and with deposit inflows having slowed somewhat, liquidity positions
of District financial institutions have been reduced significantly.
Still, there is no indication that institutions in general, or even
a significant number of individual institutions are under any
liquidity pressures.
The Outlook and Prices
For the most part, businessmen and consumers around the District
remain quite optimistic. They express concern over such things as
the government deficit, the trade deficit, and the LDC debt problem,
but have not let it affect their behavior.
Some businesses are facing what they perceive to be more pressing problems. Foreign competition is among them. Such industries as textiles and apparel and furniture are facing very weak markets for their exports and very strong foreign competition in domestic markets. They are concerned that if costs were to rise, margins would deteriorate since price increases would be nearly impossible. Costs are already reported to be putting significant pressure on margins of producers of a wide range of industrial products and goods, but price increases are apparently not tenable in the current market environment. Thus, while the outlook is for relatively stable prices, producers are very concerned about profits.