June 25, 1985
Two distinct pictures emerge from the District economy at this time. Most areas and sectors are offering very upbeat reports. Activity is generally rising, and in many cases, from already record or near record levels. Such reports come from the retail sector, the construction and housing sectors, and the service sector. On the other hand, the manufacturing and agricultural sectors are giving off very negative signals. The manufacturing sector, in particular, is reporting declining sales, production, and employment. Manufacturers continue to cite foreign competition as a major factor in the current situation, and quite a few are apparently relying more heavily on offshore production themselves, either by moving production facilities or by importing parts or materials. In agriculture, recent rain has ameliorated difficulties in some areas, but crop outlooks remain less than satisfactory.
Manufacturing
Once again, as earlier in the year, manufacturing activity has
slowed. Other respondents report declines in shipments, new orders,
and order backlogs during the past several weeks. In addition,
manufacturing employment has fallen in most areas, and several
industries are generally on reduced workweeks. Most indications are
that while these conditions may be concentrated in the textile,
apparel, and furniture industries, they are by no means peculiar to
those segments of manufacturing. There appear to be very few, if
any, industry groups actually showing growth at this time, although
several related to commercial and residential construction activity
remain above year earlier levels of activity.
Coal production remains slightly below the record levels of last year, but is still quite strong. Mining employment, on the other hand, is not holding up so well. During April coal mining employment in West Virginia was more than 5 percent below the year earlier level.
Consumer Activity
Consumer activity in the District appears quite different from
manufacturing. Sales are strong and rising very nearly across the
board. Non-durables, durables, automobiles, and services are all
doing well in most areas. Despite the general perception of strong
sales, automobile dealers are aggressively promoting attractive
financing arrangements. Tourism is also an area of strength,
although some areas report slight declines from the extraordinary
levels of activity a year ago. Tourist activity, in fact, is
prompting quite a bit of development activity in several tourist
oriented areas of the District.
Housing and Construction
Construction activity in the District remains almost uniformly
strong, with both residential and commercial building contributing
heavily. Also, there is little indication that any slowing of
activity is in prospect. Most industry observers and participants
expect continued buoyancy in construction activity and adequate
absorption of new space. Housing sales are generally robust, and are
even reported to be breaking records in some areas. There are even
pockets of strength in industrial type building, particularly around
industrial and office parks where new facilities make up most or all
of the activity.
Financial Sector
District financial institutions are still reporting moderate to
strong growth in loan demand. Business loan demand is rated as flat
to up slightly, since although business needs are expanding,
businesses are perceived as having quite a bit of cash on hand.
Consumer demand for credit is generally strong, and mortgage credit,
of course, reflects the strength of the residential real estate
market. The financial institutions seen able to continue financing
this loan growth, since deposit growth is also holding up very well.
The Outlook
The outlook around the District reflects the state of business
activity. Manufacturers, as a group, do not expect to see any
improvement in business activity over the next six months or so,
although few envision any further actual deterioration of the
economy. In most other sectors the outlook is much more positive.
Clearly, there is some uncertainty stemming from the debate on
taxes, but there appears to be general agreement that business
investment will continue on a strong upward path for at least the
rest of the year. Plans for construction activity and purchases of
producers' goods are largely in place, and there does not seem to be
any general tendency to cancel or otherwise reduce planned
investment. Consumer confidence remains strong, as job and income
growth continue despite the lull in manufacturing activity.