Beige Book Report: Richmond
March 15, 1989
Overview
The District economy generally continued to expand at a moderate
pace in February, although retail sales declined. Manufacturing
activity, which grew unevenly in January, showed more strength in
February. Export activity rose further at District ports while
import activity was mixed. Commercial loan demand remained flat in
February while the demand for consumer loans was unchanged after
posting strong growth in January. The prices of new and existing
homes have apparently leveled off, although homebuilding and home
sales appear to be normal for this time of year. In the agricultural
sector, recent snows and rains raised soil moisture from depleted
levels.
Prices at both the producer and retail levels continued to rise at about the same pace as was reported in January. Many manufacturers and retailers indicated that they had increased wages in the last two months. An increased number of manufacturers expressed concern about labor shortages.
Consumer Spending
District retail sales weakened somewhat during February according to
our regular mail survey. Almost half of the respondents indicated
that sales decreased while about 40 percent reported increases. In
contrast, half of the respondents to our January survey had reported
increased sales. Most car dealers noted declines in sales in
February, but most department store representatives reported
increases. A majority of retailers expect sales to increase over the
next six months.
A telephone survey of large hotels and resorts in the District indicated that tourist activity this winter was stronger than normal. But District ski resorts, with the exception of those in West Virginia, generally suffered because of little snowfall and unseasonably warm weather. The District's tourist businesses expect to have a good spring and summer. Almost all resort areas that were surveyed reported that bookings for the months ahead were heavier than usual.
Manufacturing
District manufacturing activity grew at a moderate pace in February.
Half of the responses to our regular mail survey of manufacturers
indicated no change in levels of activity. Among the remaining
responses, however, increases outnumbered decreases by a ratio of
about two to one in all categories—shipments, new orders, backlogs
of orders, employment, and the length of the workweek. The
proportion of respondents reporting growth in these categories was
higher than in our last report. Among manufacturers who export,
about a third indicated that new orders from abroad increased since
the first of the year; only a few reported declines. Within the
manufacturing sector, activity in the textile and apparel industry
apparently rebounded from an earlier slump.
District manufacturers remain optimistic about growth prospects in the nation and in their businesses for the next six months. Respondents expecting increases in activity outnumbered those expecting declines in each of the categories (shipments, new orders, etc.) covered by the survey.
Prices and Wages
Survey responses indicated continued upward pressure on prices and
wages. Prices of materials and finished goods apparently rose in
February at about the same pace as in January. Twenty-five percent
of the manufacturers and 48 percent of the retailers said they had
increased wages since December 31, 1988. The average reported
increase in wages was 4.5 percent in the manufacturing sector and
5.4 percent in the retail sector. In addition, more manufacturers
than in our January survey expressed concern about labor shortages.
Ports
Representatives from the three major District ports—Hampton Roads
(Norfolk), Charleston, and Baltimore—generally reported continued
increases in exports, but their reports on imports were mixed.
Export shipments were higher in February than in January at
Baltimore and Charleston, while exports at Hampton Roads remained
about the same. Although import activity was slightly higher at
Hampton Roads and Charleston, it was slightly lower at Baltimore.
Port representatives indicated that, compared to a year ago, export
activity was outpacing that of imports, and they expect this trend
to continue.
Finance
Our telephone survey of District bankers indicated little change in
loan demand. They reported that the demand for commercial loans
remained flat in February while the demand for consumer loans stayed
at the higher level reached earlier this year. Roughly half of our
contacts reported a decline in consumer demand, but no change in
commercial demand, for variable rate loans. The bankers reported no
unusual rise in the delinquency rates of consumer loans at their
institutions.
Agriculture
Recent snow and rainfall across most parts of the District have
reduced farmers' concerns over soil moisture levels. Apple and peach
blossom buds in the Carolinas are swelling and opening ahead of
schedule but so far have escaped damage from frost. The District
wheat crop, due to be harvested this spring, should be large. Acres
of wheat planted were 24 percent higher than a year ago, and yields
should benefit from the recent moisture.