November 30, 1988
Overview
District economic activity varied by sector during the first half of
November. Retailers reported lower sales, and homebuilders said
their construction was down more than seasonally. Bankers reported
that deposit and loan activity was flat. Manufacturers, however,
reported moderate growth in activity, and representatives at
District ports expect exports to grow more than imports in November.
Office vacancy rates held steady or declined in some District
cities, and in the District's agricultural sector, tobacco farmers
enjoyed a good year.
Consumer Spending
Retail sales in the District during the first half of November
apparently were down from the last half of October. Slightly over
half of the respondents to our regular mail survey reported declines
in sales, while the other respondents were about evenly divided
between those who experienced increases and those who experienced no
change in sales. Department stores reported declines in the sales of
big ticket items. Inventories rose at both department stores and new
car dealerships. Most department store managers felt their
inventories were too high, while most car dealers said their
inventories were about right. The majority of retailers expect sales
to increase in the next six months over the comparable period a year
ago.
Manufacturing
According to our regular mail survey, manufacturing activity
expanded moderately in late October and early November, at about the
same pace as in September. Responses indicating increased activity
outnumbered those indicating declines; about half of those surveyed
reported no change. Inventories of finished goods and materials were
generally unchanged. Half of the respondents said their inventories
were at proper levels, while 38 percent said they were too high.
Prices of manufacturers' materials apparently continued to rise at
about the same pace as in September.
District manufacturers have become more optimistic about the growth of general business activity in the nation. In our previous two surveys, manufacturers who expected decreases in national activity exceeded the number who expected an upturn, but in our latest survey, the respondents who expect some change in national activity were evenly split between those expecting increases and those expecting decreases over the next six months. With regard to the outlook for their own businesses, most respondents believe their shipments will hold steady or rise in the next six months.
Port Activity
Based on port activity through the first half of November,
representatives from the three major District ports—Baltimore,
Norfolk, and Charleston—said they expect increased activity through
November compared with October. Increases in exports were cited as
responsible for the current and expected increases in activity.
Imports in November are expected to rise only slightly from October
at Norfolk and remain unchanged at the other two ports. Our District
port contacts indicated that the ratio of exports to imports was
higher now than a year ago.
Construction
A telephone survey of District homebuilders indicated that new
construction slowed more in November than is usually expected for
this time of year. Well over half of the respondents reported a
drop-off in speculative building. Builders said, however, that
demand was still fairly strong, and most anticipate stable markets
for single-family homes for the next several months.
Another of our telephone surveys indicated that office vacancy rates in several large District cities either remained steady or edged down in the third quarter from second quarter levels. The office vacancy rates in the cities surveyed ranged from 13 percent in Baltimore to 21 percent in Norfolk. Vacancies in the Raleigh-Durham area have recently dropped below 20 percent, but more space is slated to open there soon.
Financial
The responses of bankers we telephoned indicated that deposit and
loan activity was essentially flat in the past three weeks. For the
most part, industrial loans on the books in mid-November were
reported as unchanged from mid-October as well as from a year ago.
The few institutions with increases in industrial loans attributed
the rise to stronger demand rather than more liberal lending
policies, while the institutions that experienced declines cited
more conservative policies. Most bankers expect increased demand for
industrial loans in 1989.
Agriculture
The District's markets for flue-cured tobacco closed for the season
last week, and final figures indicate that it was a good year.
District production, which is close to 90 percent of the national
total, was up 15 percent over last year, and prices averaged about 2
percent higher. Production of burley tobacco was about even with a
year ago. The cash value of all 1988 tobacco production in the
District is estimated to be about $150 million above a year ago.