December 7, 1994
Overview
Economic activity in the Fifth District grew moderately in late
October and November. Areas experiencing growth included the
service-producing sector, commercial real estate, ports, and state
revenues. Consumer spending was up slightly, but very strong holiday
sales were expected. Manufacturing, tourist, and agricultural
activity were flat and housing activity and loan demand declined.
Consumer Spending
Retailers, retail associations, and retail analysts contacted by
telephone reported increased activity in November, and they expected
sales during the upcoming holiday season to exceed last year's
robust level. Contacts indicated that November retail sales
increased because of weekend promotions. There was disagreement,
however, over whether consumers began holiday shopping earlier than
normal. Looking ahead, retailers expected December sales of
computers and other electronics to be strong. They also expected
good winter apparel sales in December, even though such sales were
weak in November.
Service-Producing Firms
Respondents to a mail survey indicated that activity in the service-
producing sector increased in October. Revenues rose, except in
business services, where they decreased. Wages also rose, and
employment changed little except in the wholesale sector, where it
increased. Service producers indicated that prices rose 0.4 percent
in October. They expected increased demand for their services and an
increase of 1.1 percent in their prices during the next six months.
Manufacturing
Indicators of factory activity changed little in October from their
September levels, according to a mail survey of District
manufacturers. Capital expenditures were up compared to six months
ago, and respondents expected a further increase during the next six
months. Manufacturers expected shipments and employment to increase
during the next six months, but they anticipated little change in
the workweek. Finished goods and raw materials prices increased
faster in October than in September but at rates less than the
general inflation rate.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that tourist activity experienced its usual
November slowdown. Contacts from mountain areas expected tourist
activity this winter to exceed last year's level as long as the
areas received normal amounts of snow. Rates for some rooms, meals,
and activities were expected to increase more this winter than last
winter.
Ports
Representatives at the District ports of Baltimore and Charleston
indicated that export levels in October were higher than those of
September and a year ago: import levels remained about the same. The
port representatives expected that during the next six months both
exports and imports would increase and exports would grow faster
than imports.
Finance
District financial institutions contacted by telephone reported that
loan demand slowed during late October and the first three weeks of
November. Consumer loan demand fell sharply, while commercial and
mortgage loan demand declined slightly. Interest rates were higher
on consumer, commercial, and mortgage loans. Looking ahead, most
lenders contacted were cautious about future loan demand. Some
consumer and commercial lenders in North Carolina, however, were
confident that loan demand in their areas would remain strong.
Residential Real Estate
According to a telephone survey of District realtors and builders,
residential real estate activity declined during the four weeks
preceding Thanksgiving. Building permits and buyer traffic
decreased. Home sales also decreased, except in West Virginia, where
contacts reported an increase in sales of lower-priced homes
following the introduction of a state program providing low-interest
mortgages. Builders indicated that they started fewer houses after
the recent rise in mortgage rates. Home prices remained stable,
although subcontractor wages increased in West Virginia, South
Carolina, and North Carolina.
Commercial Real Estate
District contacts reported that commercial real estate activity in
November grew at the same pace as in October. Real estate contacts
reported little change in construction, except in North Carolina,
where speculative construction increased. Commercial vacancy rates,
however, declined throughout the District. Posted commercial rental
rates remained steady, except in the District of Columbia, where
they rose. Real estate contacts reported that fewer landlord
concessions were available to tenants, and they anticipated rental
rate increases soon. Leasing agents reported that the availability
of prime office space tightened in the District of Columbia, South
Carolina, and North Carolina. Those in Charlotte, N.C., and
Columbia, S.C., said the shortages in their areas existed even for
less-than-prime office space.
State Revenues
State government forecasters said that tax collections grew
moderately in October. Real revenue growth declined in South
Carolina but picked up significantly in Maryland and slightly in the
District of Columbia. Growth remained strong in North Carolina,
Virginia, and West Virginia.
Agriculture
Agricultural activity progressed at the same rate as a year ago,
according to District farm analysts. Fall harvesting activity for
most crops neared completion, but rain delayed cotton harvesting in
some areas of the District. Crop yields were strong. Fall small-
grains planting activity was comparable to that of a year ago, and
the crops' condition was good in all District states except South
Carolina, where crop growth was off to a slow start.