September 20, 1989
Overview
District economic activity strengthened somewhat in August from its
sluggish pace in July, although a few sectors remained flat. Retail
sales continued lackluster but tourism rose. Manufacturing activity
grew slightly after declining the previous month. Export and import
activity was again mixed at District ports. Home sales increased in
some areas and remained steady in others, and nonresidential
construction activity strengthened. Loan demand was generally
steady. The District's agricultural sector looks strong this year.
Consumer Spending and Tourism
Our regular mail survey indicated that retail activity in the
District was flat in August. New car sales apparently increased
somewhat after two consecutive months of decline, but department
store sales were unchanged after two months of reported increases.
Sales of big ticket items at department stores declined slightly in
August. Some stores, however, reported strength in sales of fall
apparel. Most retailers expect sales to rise in the next six months.
A telephone survey of hotels, motels, and resorts in the District indicated an increase in tourism this summer compared to last summer. Most respondents expect tourist activity to continue better than a year ago in coming months.
Manufacturing
District manufacturers responding to our regular mail survey
reported increased activity in August following a decline in July.
Reports of increases outnumbered decreases in shipments, new orders,
and new export orders. Unfilled orders, employment, and the length
of the workweek were largely unchanged. Inventories of materials and
finished goods declined somewhat. Prices for finished goods
continued to rise, but at a rate slightly slower than reported in
July. Increases in the prices of raw materials slowed sharply,
however, as 30 percent of our respondents reported increases in
August compared with 41 percent in July.
District manufacturers were less optimistic than in July about prospects for growth in their businesses in the next six months. Respondents who expect declines in sales, new orders, unfilled orders, employment, and the length of the workweek slightly outnumbered those who expect increases. Textile producers, for example, expect demand to decline soon because of a recent increase in the volume of imports. In all manufacturing, the number of respondents who expect decreases in overall U.S. economic activity in the next six months remained above the number who expect increases, while the number who expect no change remained about the same.
Ports Reports received from the three major District ports—Hampton Roads (Norfolk), Charleston, and Baltimore—indicated that import and export levels were mixed in August as in July. Imports were reported to be higher at Baltimore, slightly lower at Hampton Roads, and about the same at Charleston. Exports were slightly higher at Hampton Roads, lower at Baltimore, and unchanged at Charleston. Both Charleston and Hampton Roads indicated that export activity outpaced import activity, a trend they expect to continue in coming months. Baltimore reported exports were lower than last year and expected them to decline further in coming months. Hampton Roads noted that coal exports were down about 35 percent from a year ago, evidently because of the Pittston coal strike.
Housing
A telephone survey of District realtors and homebuilders'
associations suggested that housing activity in the District
remained steady or increased slightly in recent weeks. Some
respondents credited lower interest rates for increases in home
sales. Most homebuilders observed, however, that construction
remained well below the levels of a year ago. Looking ahead,
respondents expect activity in the housing market to increase soon.
Nonresidential Construction
Nonresidential construction activity apparently gained some strength
in recent weeks. Industrial building was reported strong, and one
respondent sensed an end to the decline in commercial building
activity. Another noted that public construction continued steady
with good prospects for increases in road building, but that power
plant construction had slowed. Architectural engineering firms were
reported to be busy, which implies a favorable outlook for activity
in the months ahead.
Financial Institutions
A telephone survey of District financial institutions indicated that
demand for commercial and industrial loans remained steady in
August. Nearly all respondents reported moderate increases in
mortgage demand, especially for fixed-rate loans. The cost of funds
to depository institutions was apparently largely unchanged in
August. Deposit growth was generally sluggish to moderate.
Agriculture
With the harvest approaching, crop prospects are excellent for the
Fifth District. Yields of corn, soybeans, and small grains should be
at or near record levels, and tobacco yields should also be good.
Prices of most grain and bean crops are likely to average well below
last year's drought-boosted levels but to be relatively strong
nonetheless when compared to most other recent years. Tobacco prices
also have been firm this year. Prospects for livestock producers are
bright as fall approaches. Firm prices for beef, pork, and poultry
are helping producers offset higher feed costs, and with feed costs
expected to decline faster than meat prices, margins may widen
somewhat in the fall.
Income prospects for District farmers are good, with cash receipts possibly exceeding the relatively strong 1988 showing. Further adding to farmers' financial security are rising farmland values. All District states are experiencing rising values, but particularly Maryland and Virginia, where increases in land values over the last year exceeded 10 percent.