Beige Book Report: Richmond
December 4, 1991
Overview
District economic activity weakened somewhat in late October and
early November, but respondents continued to be optimistic about
business prospects for the next six months. Retail sales and shopper
traffic were lower as were most indicators of District factory
activity. Loan demand remained sluggish at District financial
institutions and few commercial construction projects were underway.
On a brighter note, activity was up at District ports and area
farmers harvested bumper crops this fall, although the outlook for
agriculture was tempered by concern about the effects of dry weather
currently gripping the District.
Consumer Spending
Our regular mail survey indicated that retail activity fell in the
District in October and early November. Sales decreased as did
shopper traffic, retail employment and capital expenditures.
Retailers reported that wholesale prices increased while wages and
retail prices rose only slightly.
Almost half of the retailers surveyed believed that the recession had not yet bottomed out in their areas; however, they remained optimistic about retail activity for the next six months. Respondents expected sales, capital expenditures and shopper traffic to rise, employment to be stable, and inventories to be unchanged. Most retailers anticipated that wholesale and retail prices would increase over the period.
In their responses to our special telephone survey, District retailers expressed less optimism about sales in the weeks immediately ahead. Most said they would be pleased of this year's Christmas sales merely matched last year's. Several retailers reported that they had started their seasonal sales promotions about two weeks earlier than usual, and a number indicated that they might offer discounts for the first time. Generally, retailers who planned to offer discounts were counting on higher sales volumes to offset lower profit margins. They indicated that they were trying to limit their inventories while still offering a wide selection of merchandise.
Manufacturing
Responses to our regular survey of manufacturers suggested that
District factory activity was somewhat lower in October. Respondents
reported declines in inventories and employment and they cited
excess capacity as the most important problem they were facing
currently. Most other indicators of factory activity, including
shipments and orders, were unchanged. Manufacturers indicated that
general business conditions had worsened, and many felt that their
local areas were still in recession.
Looking ahead, however, manufacturers remained optimistic about general business conditions and about their prospects for the next six months. Almost half foresaw increases in shipments and new orders, and few expected decreases. A majority of respondents also anticipated increases in most other production indicators except inventories.
Port Activity
Representatives at District ports--Baltimore, Charleston, and
Hampton Roads (Norfolk)--indicated that exports and imports
increased in October from September. Compared with a year ago,
export volume was higher and import volume was mixed. Exports were
expected to increase faster than imports during the next six months.
Tourism
A telephone survey of hotels, motels and resorts in the District
indicated that tourist activity was unchanged in October when
compared to September and a year ago. Over half the respondents
reported that fall bookings were about the same as last year's and
all respondents expected tourist activity to remain flat in the
months ahead.
Commercial Construction
Commercial construction remained weak across the District, according
to a telephone survey of lenders and contractors. Although some
nonspeculative retail construction was proceeding, vacancy rates
remained high, and some respondents said it would take several years
to absorb the existing vacant space. Although public works projects
were responsible for much of the ongoing construction, some large
private projects were still underway. No new major commercial
construction starts were reported.
Finance
District financial institutions contacted by telephone indicated
that lending activity was lackluster. Most of those surveyed
reported that their non-price lending standards had not changed over
the last six weeks. With regard to pricing, all of the contacted
banks indicated that they had lowered their prim rates recently, and
most reported that other interest rates they charged their customers
also had decreased over the period. Despite lower rates, banks
reported that the demand for consumer and business loans remained
weak, although the demand for home mortgage refinancings continued
to increase.
Agriculture
District agricultural analysts reported that crop yields generally
were above average, but they said that dry weather may have damaged
recently planted crops and reduced winter hay supplies. With
harvesting almost complete, analysts reported that District farmers
had produced large crops of corn, peanuts, tobacco and sweet
potatoes. The analysts cautioned, however, that very dry weather
conditions over much of the District were slowing the emergence of
fall-planted small grains. Also, dry weather has left District
pastures in poor condition and caused concern about the adequacy of
forage supplies for the approaching winter.