December 5, 1984
Overview
Although there are presently cross currents at work, the primary
thrust of the District economy seems to be forward. Employment
appears to be making substantial gains despite seasonal weakness in
some sectors. Retail sales have been holding their own and most
observers are encouraged by the early indicators of holiday buying
strength. Construction activity is essentially unchanged, remaining
strong in the metropolitan areas, somewhat less robust elsewhere.
Countering all of these positive factors, is what appears to be a
sharp contraction in the textiles and apparel industries. Several
major layoffs and plant closings around the District have been
announced recently, and industry employment has fallen
substantially. This contraction is generally attributed to rapidly
increasing imports of competing products. Business loan demand seems
stable and relatively strong, although there are variations from
area to area. In agriculture, an excellent growing season in much of
the District, good prices, end a strong livestock sector should make
for significantly improved cash receipts in 1984 and some relief on
the agricultural credit front.
Manufacturing
The manufacturing sector must almost be treated as two, since the
behavior of textiles and apparel differs sharply from most other
sectors. On balance, the District's manufacturing industries are
continuing to expand output and employment, and the gains appear
significant in some industries, such as machinery and electrical
equipment, where year over year gains in employment remain the rule.
Building materials and furniture production and employment have
apparently stabilized after several months of ups and downs.
Textiles and apparel, on the other hand, after a year of little
change, began cutting back employment and output, severely in some
cases. As noted, the import situation is a major factor. Nationally,
1983's record for textile and apparel imports had been broken by the
end of September.
Inventories at the manufacturing level are essentially stable and there is little noticeable dissatisfaction with present levels. Current plant and equipment capacity also remains basically at desired levels, and there is little inclination on the part of most manufacturers to alter existing expansion plans. Prices in the manufacturing sector continue stable, with no significant upward pressure apparent in any sector.
Coal production in the District, as in the nation, fell rather substantially after the BCOA-UMW negotiations were completed. Nonetheless, production, year to date, remains well ahead of last year, and record output is still within reach.
Another segment of the District bringing in an outstanding year is the ports. Although much of the traffic is in imports, activity, particularly at the District's larger ports, has been very strong.
Consumer Activity
Consumer spending in the District has been quite strong for some
time, and indications are that it remains so. Earlier, there was
some trepidation among retailers, but recent developments have
apparently relieved it. Early indications are that the holiday
buying season got off to a good start. Most observers think that
sales will be up from a year ago, and thus, quite healthy.
Even before the seasonal kick-off, durable goods sales which sagged in late summer, had rebounded and were making gains relative to other product lines. Although retailers had expressed some concern over inventory levels, their fears on that front seem to have been quieted as well. Part of the improvement in retailers attitudes arose from their perception that sales were doing well despite unfavorable weather conditions.
Construction
In general, the construction industry In the District is staying
busy. Variation persists, particularly between the larger cities and
smaller towns and rural areas. There are presently indications,
however, that industrial projects are lending support to a number of
localities outside the urban areas. Within the metropolitan areas
commercial and residential construction are still doing well, apart
from seasonal factors. There are indications, however, that in some
of these areas multifamily residential markets have or are about to
weaken while excess supplies are worked off.
Agriculture
The agricultural sector of the Fifth District should experience or
economic rebound in the current year. An excellent growing season
throughout most of the District, good prices, and a strong livestock
sector should provide $8.15-$8.20 billion in cash receipts for
1984 about 10-12 percent above the drought reduced 1983 level,
but only about equal the 1982 mark. The cost of production should
exhibit only modest increases over the same period, leaving the net
income of farmers substantially improved over the 1983 position.
The improved income position of District farmers is expected to show up in the District agricultural credit picture. The quarterly survey of agricultural credit conditions indicates that agricultural loan repayment rates are improving at District banks. In addition, short and intermediate loan demand is strengthening although the demand for long term loans remains weak. District farmland prices are stabilizing.
Outlook
The outlook around the District has improved somewhat in recent
weeks, although most respondents see activity as essentially flat in
coming months. Apart from the textile and apparel sectors, the
improvement in outlook seems to have arisen as activity continued at
levels previously considered unsustainable. The trade deficit
remains a major concern, particularly among the textile, apparel,
and furniture manufacturers. Their attitudes are clearly less
buoyant than those in other sectors.
Consumers and retailers are confident, particularly since recent sales activity has improved. There remains little concern with the prospect for inflation.