August 5, 1986
Overview
District retailers report a slight increase in activity over the
last month, and there is little change in the District's housing
market, which remains strong in most urban areas. Manufacturing
remains generally weak, but some manufacturing data suggest a
moderate improvement in some areas. The service sector continues
strong, the tourist business is excellent, and municipal governments
seem as yet unaffected by expected cuts in federal funds.
Agriculture has been hit hard by heat and drought: many counties
throughout the District are qualifying farmers for disaster relief.
Consumer Spending
New cars are selling at about last month's pace. In department
stores, total sales are up slightly, but sales of big-ticket items
are down for the second consecutive month. Sixty-two percent of the
retailers in our monthly survey expect sales to improve during the
next six months, as compared with 21 percent who expect declines.
Tourism continues strong. Attendance is breaking records at state
parks and other major tourist areas.
Housing Market
Sales of single-family homes are steady to up slightly in most large
urban areas, according to realtor associations. Demand continues to
range from very strong in some large metropolitan areas such as
Washington, D.C., where home price increases of 15 to 25 percent
over last year are not uncommon, to fairly weak in many small towns
and rural areas such as those in West Virginia. Reports of mixed
movements in mortgage interest rates and points suggest little net
change in mortgage terms in the last month.
Manufacturing and Mining
District manufacturing activity has declined marginally by some
measures and increased marginally by others. More survey respondents
report declines than increases in shipments and new orders. On the
other hand, more respondents report increases than decreases in
employment and the workweek.
A majority of manufacturers still expect business to improve, but not as many are optimistic as last month. This month, 58 percent think the economy will expand during the next six months; last month, 68 percent thought so.
Apparel and textile firms report increased activity over last month, and they expect continued increases over the remainder of this year. Furniture manufacturers report a decline in activity, as do machinery manufacturers, where capacity utilization is around 50 percent.
Virginia and West Virginia coal mines have increased production in recent weeks, probably because the hot weather has increased demands for electric power, and because new emphasis on environmental protection has increased the demand for low sulphur coal.
Services and Government
Fifty-two percent of service sector survey respondents report
increases in sales over last month, as compared with 24 percent who
report declines. Sixty-six percent of the responding service firms
expect sales to increase in the second half of the year while only 9
percent expect sales to decline. Forty-eight percent expect rise in
employment over the next six months, while 7 percent anticipate a
decline.
State, county, and city government respondents are concerned about budget cuts, but indicate that their expenditures have been holding steady or increasing. With regard to the next six months, 83 percent of the municipal government respondents expect a decline in revenue from the federal government, and 75 percent expect increases in tax revenues. Expenditures are expected to increase by 75 percent of the respondents; the remainder anticipate no change. Forty-eight percent of the respondents foresee increases in employment, as compared with 26 percent who foresee declines.
Agriculture
Record-setting heat and prolonged drought conditions have severely
damaged District agriculture in recent weeks. Crops—particularly
soybeans and corn—are experiencing extreme stress. In addition,
agricultural scientists expect insect damage to be far above normal.
The shortfall in yield due to heat, drought, and insects will result
in hundreds of millions of dollars of losses to crop producers.
The drought has also hurt livestock producers. Cattle are being marketed long before they reach profitable weights, due to the poor conditions of pastures and shortages of hay. Shipments of hay from the Midwest have provided some relief, but heat stress continues to damage pastures and hay. Poultry producers report higher death rates among their flocks from heat stress.