May 2, 1990
Overview
The District economy continued to grow at a moderate pace in early
April. Retail sales rose in most areas of the District, though big-
ticket items contributed less than in late March. Manufacturing
activity again posted modest gains, and shipments at District
seaports were generally stronger. Financial institutions, however,
experienced a slight increase in problem loans, particularly in
commercial real estate. Also, large financial institutions and their
borrowers reported tighter lending requirements, especially for
commercial real estate and some other types of business loans. In
agriculture, cold and wet April weather proved to be a mixed
blessing—benefiting some crops while harming others.
Consumer Spending
Responses to our telephone survey of state retail associations
indicated that all District states except West Virginia experienced
increased sales of general merchandise during the first two weeks of
April as compared with the last half of March. Sales of apparel were
especially strong in Virginia, Maryland, and the District of
Columbia. Sales of big ticket items declined relative to total sales
in the District of Columbia, West Virginia, and Maryland while they
remained about the same in Virginia and South Carolina. All of the
respondents expect sales to increase during the next six months.
Manufacturing
The results of our regular mail survey of manufacturers showed that
District manufacturing activity in April continued to grow at about
the same slow rate that was indicated in our previous survey in
February. In April as well as in February more respondents reported
increases than decreases in shipments and new orders. New orders for
exports were reported to be higher by 25 percent of the April
respondents--up from 13 percent who reported increases in February.
Unfilled orders, employment, and the length of the workweek,
however, were largely unchanged. Prices for raw materials rose at
the same moderate pace reported in February. Inventories of
materials and finished goods were largely unchanged.
District manufacturers were more optimistic than earlier this year about prospects for growth in their businesses and in the national economy. More than half of the April respondents, up from 38 percent in February, look for their shipments and new orders to increase during the next six months, and the proportion who expect an increase in national economic activity rose from 31 percent in February to 42 percent in April.
In the April survey we asked manufacturers how foreign developments might affect their sales. The table below summarizes manufacturers' responses to the question: How do you expect the movement toward free markets in Eastern Europe to affect your firm's sales in the next...
six months |
year |
two years |
|
| No Effect | 92% |
77% |
51% |
| Sales Will Increase | 6% |
19% |
42% |
| Sales Will Decrease | 1% |
3% |
6% |
Ports
Representatives from the three major District ports—Baltimore,
Charleston, and Hampton Roads (Norfolk)—noted steady to higher
shipments in April compared to March. Exports were higher at both
Hampton Roads and Baltimore and about the same at Charleston. Import
shipments were also generally higher with volume up at Hampton Roads
and Charleston and about the same at Baltimore. When compared to a
year ago, export activity was higher at Hampton Roads, lower at
Baltimore, and unchanged at Charleston while import activity was
higher at Hampton Roads but lower at Charleston and at Baltimore.
Representatives at all District ports expect exports to grow faster
than imports during the next six months.
Financial
A telephone survey of District financial institutions suggested that
the number of problem loans increased slightly in recent weeks. Half
of the respondents reported a small increase in the volume of
nonperforming loans, while the other half reported no change. Those
contacted indicated that the problem loans were concentrated in the
commercial sector, particularly in commercial real estate.
A special telephone survey of business and financial people in the region revealed that most financial institutions had tightened lending requirements, especially for loans for the start-up or expansion of small businesses and for the speculative development of real estate. According to borrowers from the regional banks, new lending for commercial real estate has nearly dried up, and there has also been a definite but less pronounced tightening of certain other types of business credit. The borrowers from smaller banks and the smaller banks themselves, however, reported limited if any tightening of credit. Most manufacturers, retailers, and other businesses that borrow from smaller banks reported no change in credit conditions.
Lenders were also asked about their expectations for interest rates. Most expect rates to remain essentially unchanged or trend downward slightly in the coming months.
Agriculture
The effects of three weeks of cold, wet weather in April on District
agriculture were mixed. Despite rain-shortened farm workweeks, the
planting of corn and the transplanting of tobacco progressed at
faster than normal rates. In addition, the recent precipitation
raised moisture levels to adequate or surplus in all areas of the
District except South Carolina. Dry conditions prevailed there
through mid April, especially in the state's mid to southern
portions.
We received mixed reports on crops. The abundant rains were good for hay and pasture conditions around the District. Wheat was maturing rapidly but beetle infestations and mildew were reported in some wheat-growing areas. The recent cold weather damaged apple and peach crops in Virginia and in the Carolinas. The losses were severe in some areas.