January 18, 1995
Overview
Economic activity in the Fifth District grew moderately in late
November and December. Areas experiencing growth included the
service-producing sector, state revenues, and agriculture. Strong
holiday sales boosted consumer spending. Port trends were mixed, and
manufacturing and commercial real estate activity were flat. Loan
demand, home sales, and tourist activity declined.
Consumer Spending
Retail associations and retail analysts contacted by telephone
reported that Christmas sales increased between 8 percent and 12
percent from last year's level and that after-Christmas sales were
good. They also said that retailers offered fewer after-Christmas
discounts than they did last year. Analysts' outlooks for early 1995
sales were mixed. Those expecting weaker sales compared to 1994
pointed to higher consumer debt levels, while those expecting
stronger sales pointed to last year's unusually harsh weather that
kept shoppers at home.
Service-Producing Firms
Preliminary results from a mail survey indicated that activity in
the service-producing sector increased in December. Revenues rose,
except in health services, where they decreased. Wages also rose,
and employment changed little. Service producers indicated that
prices rose 0.5 percent in December. They expected increased demand
for their services and an increase of 1.3 percent in their prices
during the next six months.
Manufacturing
Indicators of factory activity changed little in December from their
November levels, according to preliminary results of a mail survey
of District manufacturers. Raw materials inventories 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
prices increased faster in December than in November, but at a rate
less than the general inflation rate. Raw materials prices increased
more in December than in November, and at a rate higher than the
general inflation rate. In December, respondents expected prices to
rise more during the next six months than they had in November.
Tourism
A telephone survey of hotels, motels, and resorts throughout the
District indicated that tourist activity generally decreased in
December from November. December activity at ski resorts was below
its year-ago level because of warmer weather, but bookings were up
for the rest of the winter. Contacts expected better-than-normal
business and slight price increases during the next six months.
Ports
Telephone interviews with representatives at the District ports of
Baltimore and Hampton Roads (Norfolk) indicated that import and
export levels in November were higher than those of a year ago but
were mixed compared to their levels in October. Charleston's
representative, however, reported that the Charleston port
experienced one of its busiest months ever. Representatives at
Charleston and Baltimore expected imports and exports to increase
during the next six months, but the representative at Hampton Roads
expected both to decrease.
Finance
District financial institutions contacted by telephone reported that
loan demand continued to slow during late November and December.
Consumer and commercial loan demand fell moderately, while mortgage
loan demand declined slightly. Interest rates were higher on
consumer, commercial, and mortgage loans. Many District lenders
expressed concern that future interest rate increases might dampen
loan demand. Most consumer and commercial lenders in North Carolina,
however, were confident that loan demand would remain strong in that
state.
Residential Real Estate
According to a telephone survey of District realtors and builders,
residential real estate activity declined in December. District home
sales decreased despite increased sales of lower-priced houses.
Building permits, buyer traffic, and housing starts, however, were
unchanged. Most real estate agents attributed the decline in home
sales to increased mortgage interest rates. Home prices remained
stable, although prices of nonlumber building materials rose
slightly.
Commercial Real Estate
District contacts reported that commercial real estate activity in
December grew at the same pace as in November. Real estate contacts
reported little change in construction, except in West Virginia,
where retail outlet building activity increased. Posted commercial
rental rates increased throughout the District. Commercial vacancy
rates remained steady except in North Carolina and Virginia, where
they declined. Leasing agents reported that the availability of
prime office space tightened, especially around Washington, D.C.
State Revenues
State government forecasters said that tax collections grew
moderately in November and December. Real revenue growth was strong
in Maryland, North Carolina, Virginia, and West Virginia, somewhat
weak in South Carolina, and flat in the District of Columbia.
Agriculture
Agricultural conditions were better than a year ago, according to
District farm analysts. Small grains were in good-to-excellent
condition because temperatures were above normal in December and
early January. Tobacco prices remained strong, and farmers' 1995
production quotas rose because tobacco companies purchased farmers'
excess stocks of tobacco. Hog and poultry output rose despite
sharply lower hog prices and slightly lower poultry prices. One
contact said long-term contracts insulated North Carolina hog
producers against plunging prices on national markets.