May 6, 1986
Overview
Business condition are reported to be stronger than a few weeks ago
by most retailers and manufacturers, although weakness persists in
the textile and shipbuilding industries and in mining. Residential
construction continues very strong with some indications of a
leveling off, while commercial building is slowing somewhat.
According to our sources, banks are liquid and S&Ls are busy,
agriculture is in the midst of a relatively normal spring, the
regional ports are experiencing increased activity, and summer
tourism is expected to be very good.
Consumer Spending
Retailers report significant increases in activity in recent weeks.
Most attribute the surge in sales to declining interest rates. Major
department stores report strong to very strong durable goods sales
that are expected to remain robust along with the housing boom.
Nondurable goods, especially apparel, are also moving well. Ski
areas enjoyed their best season on record, and summer tourism is off
to an excellent start. Resort bookings are running above optimistic
expectations, and major tourist areas are revising their forecasts
upward due to lower gasoline prices and decreased interest in
traveling abroad.
Manufacturing and Mining
Regional manufacturing activity is up by some measures and down by
others this month, according to our survey of business conditions.
Fifty-two percent of the responding firms report increased shipments
and 19 percent report no change over last month. The volume of new
orders is also up, although the backlog of orders is reported to be
down by 48 percent of the responding firms. Inventories remain
mostly unchanged or reduced but are still judged too high,
especially in light of the reduced backlogs. For this reason,
perhaps, 32 percent of the responding firms report fewer employees
and 27 percent report declines in hours worked as compared with a
month ago. Within this environment, the majority of firms believe
that business activity in their immediate market areas and the
production of their own firms will pick up during the next six
months.
Within the manufacturing sector, shipbuilding and ship repairs remain bleak, with foreign competition cited as the main problem. Apparel executives express concern over imports, especially those from the Orient, although production remains steady in both the textile and apparel industries.
The regional ports show increased activity in both import and export shipments. The lumber industry continues to grow along with housing. Mining output remains steady although slightly below a year ago.
Construction
The residential real estate market remains very strong, with the
number of units sold running sharply above year-ago levels across
the District. A decline in the length of time property is remaining
on the market also attests to the robustness of current isles
activity. Construction of new residential units is generally up,
although reports of a leveling off are coming from some areas.
Prices are moving upward almost everywhere in the District, but the
size of the increases varies widely.
Commercial and office construction is generally perceived to be slowing somewhat. Vacancy rates for office buildings in urban areas remain high and are generally regarded to be a primary factor limiting more new construction.
Financial
Members of our Small Business and Agriculture Advisory Council
report that banks are highly liquid and eager to make good loans at
low rates.
S&L executives report very high volume in mortgage financing and refinancing. Mortgage rates are being held up artificially, they say, to reduce applications.
Agriculture
Spring planting is progressing at a normal pace throughout the
District. Small grains and pastures have been held back by cooler-
than-normal weather, but recent rains have alleviated the moisture
shortage experienced during March and the first half of April.
Livestock producers are currently facing some downward price
pressure but lower feed costs should assist them in maintaining
profit margins.
Agriculture in the Fifth District remains stronger than in many other areas of the nation. Recent data indicate that the region's farmland values have remained reasonably stable over the past year; possibly the multi-year downward trend may be nearing the bottom.