March 13, 1991
Overview
District business and financial activity apparently weakened
somewhat in recent weeks, although there was a noticeable shift
toward optimism about near-term prospects. Retail sales,
manufacturing, real estate, tourism, and bank lending evidently
declined in January and February. Exports were generally unchanged
and imports rose at District seaports. Mild weather conditions
likely benefited agriculture.
Survey respondents--even those surveyed before the ceasefire in the Gulf War--were decidedly more optimistic about the economic outlook than they had been a few weeks ago. Further, some who remained pessimistic believed that the economy would begin to recover when the conflict ended--a condition now apparently met.
Consumer Spending
Our regular survey of retailers suggested that retail activity
softened in late January and early February. Most of those surveyed
reported decreases in shopper traffic and in total sales, including
sales of big ticket items. Nearly four in five reported that sales
had declined since the Allied air campaign began. Employment at
retail stores decreased, while wholesale and retail prices
increased.
A majority of the retailers expected their sales to rise in coming months. This optimism contrasted with retailers' pessimistic survey responses a few weeks ago.
Manufacturing
Our regular mail survey of manufacturers indicated that District
manufacturing activity declined slightly in January and early
February. Far more respondents reported decreases than increases in
shipments, orders, and employment. Over two-thirds said poor sales
were their biggest problem. Nearly half said that sales had declined
since the Gulf War began, while only one in eight said sales had
picked up. Most manufacturers indicated that the prices and
inventories of their raw materials and finished products had
remained stable in recent weeks.
Activity in the textile and furniture industries remained depressed. Several producers have gone out of business in recent months. Most manufacturers were operating on reduced workweeks. One producer expressed concern over the deteriorating quality of manufacturers' accounts receivable.
Looking forward, however, manufacturers were optimistic for the first time in several months. One-half believed that orders would increase over the next six months, while only a few foresaw a decline. Similarly, one-half expected conditions in their local areas and in the nation to improve in the next six months.
Port Activity
District ports--Baltimore, Charleston, and Hampton Roads (Norfolk)--
indicated that exports were generally unchanged while imports were
generally higher in January than in December. Compared with a year
ago, export shipments were higher at all three ports and imports
were higher at two. Authorities at all ports expected exports to
rise faster than imports over the next six months.
Real Estate
Commercial and residential real estate activity apparently remained
weak across most of the District during late January and early
February. Contractors and real estate analysts reported very little
commercial construction in their areas. One analyst said that
absorption of existing office space was slowed by the consolidations
of many service-producing firms--primary users of office space.
Buyer interest in houses apparently rose, but home sales remained sluggish in most urban areas and home prices were reportedly down slightly. Sales activity was reported weakest in the most expensive segment of the market and generally stable in the lower-priced segments.
Tourism
A telephone survey of hotels, motels, and resorts indicated that
tourist activity was below average this winter. Over half the
respondents experienced declines in room occupancy while one-third
noted little change. The slow tourist business was attributed to the
Gulf War, the general economic slowdown, and the lack of snow for
skiing. The respondents expected business to improve, however, in
the months ahead.
Finance
District financial institutions contacted by telephone reported that
loan volume and interest rates were lower in recent weeks. Loan
demand was also down compared with a year earlier. Almost all of
those contacted reported extremely slow commercial real estate loan
activity, with little borrower or banker appetite for loans. Bankers
cited uncertainties related to the Gulf War and sluggish economic
conditions as reasons for the slowdown in consumer loans. Several
bankers said that the recent economic downturn had dampened
consumers' willingness to borrow. One Northern Virginia banker,
however, reported a large increase in residential mortgage
applications in the days leading up to the ceasefire, and several
thought demand would pick up somewhat in coming months.
Almost all of the bankers expressed a belief that current lending standards were prudent and, for the most part, not causing creditworthy borrowers to be refused credit. Several said, though, that appraisal costs and the lengthy approval period for mortgage loans may have caused some potential borrowers to withdraw applications.
Agriculture
Farm analysts reported that mild winter weather had generally
benefited small grains and lessened the drawdown of winter hay
stocks. Mild weather apparently helped many District farmers begin
spring planting preparations earlier than usual and also may have
boosted survival rates of winter calves.