October 18, 1988
Overview
Economic growth apparently slowed further in the District in
September, although manufacturing seemed to regain some of the
strength that it had lost in August. Our September survey indicates
that retail sales were flat. Slower rates of increase in prices and
wages were reported in retailing as well as in manufacturing. Sales
of new homes declined, as did homebuilding activity. The levels of
shipments in and out of our District ports were largely unchanged.
Reports from other District sectors were mixed. Depository institutions indicated little change in commercial loan demand but continued strength in home equity loans. Farmers gave uneven reports on the fall harvest and were uncertain as to how disaster payments will be made. Resort and hotel representatives said this summer's tourist activity was above last summer's, but that fall bookings were about the same as at this time a year ago.
Participants in our surveys were also asked about their expectations for the next six months. Among producers, optimism declined for the second month in a row, but most still expect business conditions to remain the same or improve in the months ahead. Among retailers, optimism about the economic outlook remained at last month's high level. Most of the bankers contacted expect interest rates to rise, but most homebuilders expect mortgage rates to decline. District farmers who escaped the worst of the drought expect their incomes this year to be above those of a year ago, and they look for further income gains next year.
Consumer Spending and Tourism
Responses to our regular wail survey of District retailers imply
that sales were unchanged in September from August, while other
indicators of retail activity were mixed. Almost equal percentages
of retailers reported declines, increases, and no changes in their
sales. Reports of decreases in employment outnumbered reports of
increases, but over three-fourths of our retailers indicated no
change in employment. Inventories were said to be higher by one-
third of the respondents, and lower by one-fifth. About 40 percent
said they had raised wages in September, compared to about half who
said they did so in August.
Sales activity varied by type of store. Among department stores, about 40 percent reported decreases in sales, and about 20 percent reported increases. Sales of big ticket items declined in 20 percent of the department stores and rose in about 10 percent. Most car dealers reported increases in sales, while most furniture stores reported no change.
Most District resorts and hotels contacted by telephone said this summer's tourist activity was higher than last summer's. Bookings for this fall are about the same as at this time last year.
Manufacturing
Manufacturing activity continued to expand in September according to
respondents to our regular mail survey. Thirty-nine percent of the
respondents in the District reported increased shipments and 13
percent reported declines, compared with 34 and 21 percent,
respectively, in our previous survey. New orders, employment, and
the length of the workweek also increased, and the backlog of orders
declined. Inventories of finished goods were unchanged in September
while inventories of raw materials declined somewhat. Sixteen
percent of our respondents said they raised wages in September,
compared with 20 percent who raised wages in August.
Prices of manufacturers' materials have apparently continued to rise, but the pace of increase slowed for the third consecutive month. Fifty percent of our respondents said that prices of raw materials increased in September, compared with 61 percent who reported increases in August.
For the second consecutive month, manufacturers who said they expect decreases nationally in the general level of business activity exceeded the number who expect an upturn. Twenty-eight percent anticipate a decline in the next six months, while 20 percent anticipate an increase. With regard to the outlook for their own businesses, 40 percent of the respondents believe their shipments will rise in the next six months and 31 percent anticipate declines. Producers who foresee declines in their unfilled orders, workweeks, and inventories of materials and finished goods outnumbered those who expect increases.
Port Activity
No clear trend in trade is apparent from the September reports of
the three major District ports-Hampton Roads, Baltimore and
Charleston. Shipments in September were up slightly over August
levels at Charleston, down slightly at Hampton Roads, and unchanged
at Baltimore. Import shipments remained about the same at Baltimore
and Charleston, but declined slightly at Hampton Roads.
Housing
District home builders' associations surveyed by telephone indicated
a softening in activity in the housing sector. Builders reported
that the seasonally adjusted pace of new home sales declined more in
September than in August. In addition, the level of home building in
the District apparently declined further from its pace of a year
ago. While most respondents reported generally slower activity, some
indicated increased sales of homes priced above $200,000.
Financial
Our telephone survey of District financial institutions indicated
little change in the demand for commercial loans in September. Two
banks, however, reported declines in loans for commercial
construction.
Reports of the demand for residential mortgages varied widely. About the same number of respondents reported increases as decreases. Many respondents said the demand for home equity loans remains strong despite the winding down of promotional efforts.
Agriculture
Fifth District farmers gave mixed reports on their fall harvests. In
the areas of extreme drought, some crops were total losses. A farmer
from central Maryland reported that corn fields were not worth
picking in his area. A farmer from North Carolina, however, said his
state is enjoying an above normal corn harvest. The peach harvest
was reported to be very good in both Carolinas. Late soybeans in
Maryland and South Carolina received adequate rain and should yield
well. District cotton production is up this year, partly because
more acres were planted.
Total farm income in the District probably will be higher this year than last. Farm production this year is expected to match production of last year, which was also a year of drought in the District. This year, however, farm prices—including the prices of poultry, and those of most crops—have been higher because the drought was a national phenomenon that reduced supplies.