September 6, 1988
Overview
Economic conditions in the District appear somewhat less robust in
August than in July. Manufacturing activity increased at a slower
pace, and manufacturers were somewhat less optimistic about the
outlook. Department store sales were unchanged while furniture and
car sales were down. The market for new homes remained strong.
Exports rose and imports fell at District ports. Bankers reported
moderate increases in consumer and real estate loans. Agricultural
conditions improved somewhat with the recent rainfall.
Only one-fifth of manufacturers, but over half of our retail respondents, said they had raised wages during the month. Meanwhile, some slowing in producer price increases was evident.
Consumer Spending
District retailers responding to our regular mail survey reported
decreased activity in the ten days ending August 17 compared with
the previous ten days. Thirty-seven percent of the respondents
reported declines in sales and 21 percent reported increases, as
compared with 33 and 48 percent, respectively, who responded to our
previous survey in mid-July. Sales of big ticket items were down
according to about one-fourth of the respondents while 65 percent
reported no change. Within the retail sector, department store
respondents generally reported no change in sales while the majority
of furniture store respondents and car dealers reported declines.
Inventories were also down.
Employment in August was roughly even with that of July among our respondents. About half of the retail respondents said they had raised wages during the first half of August.
Manufacturing
Manufacturing activity apparently expanded only slightly in August,
according to our regular mail survey. Thirty-two percent of the
respondents reported increased shipments, down from 38 percent in
the previous survey. Reports of unchanged shipments increased to 46
percent from 38 percent in the previous survey. New orders, backlogs
of new orders, employment, and the length of the workweek also
increased, but only marginally. Slightly over half of our
respondents reported no change in inventories of finished goods and
materials and about one-fourth reported increases.
Prices of manufacturers' materials and finished goods continued to rise, but at a slower pace than was reported in July. The prices of finished products increased according to 21 percent of our respondents, and 61 percent reported higher prices for raw materials. The corresponding percentages in July were 35 and 69.
One-fifth of our respondents said they raised wages in August or expect to raise them before month-end. Most of these manufacturers said the wage increases were previously scheduled.
In our latest survey, District manufacturers were somewhat less optimistic about the outlook for the economy. For the first time in several months, respondents expecting a decline in national business activity in the next six months about equaled those expecting an increase. With regard to the outlook for their own businesses, 36 percent of the respondents believe their shipments will rise in the next six months and 26 percent anticipate declines. Producers who expect declines in their unfilled orders and workweeks exceeded the number who expect increases.
Housing
The pace of new home sales remained strong in August according to
our telephone survey of District realtors and builders. Most of them
reported that both sales and new listings remained healthy levels.
Only a few noticed a slowdown in activity, which they attributed to
the recent rise in interest rates.
Finance
Executives of District financial institutions reported continued
growth in their sector. About half of the respondents said that
deposit growth was more rapid than a year ago, while only one
reported a decline in deposits. Growth in consumer loans, home
equity lines, and hone mortgages continued at the moderate levels
reported a month ago. Most of our banking contacts have not observed
any change in loan or deposit trends.
Agriculture
District agricultural conditions improved somewhat in August as
timely rains helped reduce the heat stress on crops in many farm
areas. According to our contacts, the condition of the peanut and
soybean crops improved, and tobacco is in generally good shape.
Corn yields will vary widely in the District this year. On the coastal plains of North Carolina, where most of that state's corn crop is grown, yields are expected to be excellent. In many other parts of the District, however, the rains came too late to help most of the severely damaged crop. Two successive summers of drought have Maryland farmers talking about planting more winter wheat and barley and less corn in the future.
Rising poultry prices are expected to help District producers maintain profits in spite of increased feed costs due to the drought. Cattle and hog producers also look for increased prices for livestock in coming months.