Beige Book Report: Richmond
May 8, 1996
Overview
Economic activity in the Fifth District grew moderately in
late March and April. Retailers, manufacturers, port
representatives, temporary employment agencies, and service
producers reported that growth was higher in their sectors. Activity
in the tourism and financial sectors was mixed, while the growth of
state revenues varied across states. Residential real estate
activity grew more slowly but commercial real estate activity
strengthened. Conditions in agriculture were normal.
Retail Trade
Most indicators of retail activity suggested increased
growth in April, according to preliminary results from a mail survey
of District retailers. Sales revenue and shopper traffic growth
increased. Employment growth increased slightly; wage growth changed
little; and the growth of inventories and big-ticket sales slowed.
Survey respondents indicated that their prices rose less in April
than in March. Respondents' six-month outlook was for their prices
to rise more slowly than was their forecast in March.
Service Production
The pace of expansion in the service-sector rose
in April, according to preliminary results from a District mail
survey. Revenue and employment growth was higher and wage growth
changed little. Service producers reported that their prices rose at
the same rate in April as in March. Respondents' six-month outlook
was for their prices to rise more slowly than was their forecast in
March.
Manufacturing
Most indicators of manufacturing activity growth
increased in April, according to preliminary results from a monthly
mail survey of District manufacturers. Except in Maryland, survey
respondents reported a faster pace of expansion in shipments, new
orders, and order backlogs. Maryland manufacturers reported that
growth weakened, and one contact there attributed the weakness to
defense cutbacks. Manufacturing employment and the workweek changed
little and respondents continued to report a scarcity of skilled
labor. Manufacturers indicated that finished goods prices increased
slightly in April from the month before, but that raw materials
prices declined. Respondents' six-month outlook was for their prices
and the prices of raw materials to rise faster than was their
forecast in March.
Tourism
A telephone survey of hotels, motels, and resorts
throughout the District indicated that April tourist activity was
above March levels but below those of a year ago. Baltimore contacts
reported that baseball boosted tourism above last year's strike-
affected level. Compared to a year ago. District beach activity was
hampered by an earlier Easter and colder-than-normal temperatures,
but spring bookings were up. Contacts expected better-than-normal
business and slight increases in prices during the next six months.
Port Activitybr> Representatives at District ports indicated that both export and import levels in March were higher than in February and a year ago. Contacts continued to expect exports and imports to increase during the next six months, with exports expected to rise faster than imports.
Temporary Employment
A telephone survey of District temporary
employment agencies indicated that the demand for temporary workers
was higher than in early March and a year ago. Wages paid to
temporary workers increased faster than the general price level
during the past year, but were unchanged during the last six weeks.
Contacts indicated that companies were hiring more temporary workers
into permanent positions than a year ago. Looking forward, contacts
expected the demand for temporary workers to strengthen during the
next six months.
Finance
Contacts at District financial institutions reported that
lending activity was mixed during late March and April. Lenders
indicated that the demand for commercial and consumer loans was
unchanged from early March and that the demand for mortgage loan
refinancings weakened. Compared to the previous six weeks, interest
rates were unchanged on commercial and consumer loans but were
higher on mortgage loans.
Residential Real Estate
According to a telephone survey of District
real estate agents and homebuilders, residential real estate
activity increased more slowly in late March and April. Housing
starts, sales, and customer traffic grew at a somewhat slower pace.
Homebuilders claimed that the recent increase in mortgage interest
rates had negatively impacted their markets. Real estate agents said
that the recent increase had forced some potential buyers out of the
market but had led others to close more quickly on open
transactions. Construction wages and building materials prices
increased slightly.
Commercial Real Estate
District contacts reported that commercial
real estate activity picked up in late March and April. Leasing
activity increased, landlord concessions all but disappeared, and
commercial rents continued to rise. Vacancy rates fell, except in
West Virginia where they were unchanged. The availability of prime
office space continued to tighten in most of the District and nearly
half the respondents reported shortages; one Maryland contact
characterized the shortage in his area as "desperate." Contacts
continued to report new construction, especially in the Carolinas
and the District of Columbia.
State Revenues
State tax collections were mixed in March compared
to February. Real revenue growth was stronger in North Carolina,
Virginia, and West Virginia; flat in South Carolina; and somewhat
slower in Maryland and the District of Columbia.
Agriculture
Activity in agriculture progressed at a normal pace
according to district agricultural analysts. Warmer weather in late
April allowed farmers to catch up on planting activity delayed by a
colder-than-usual March. Winter's bite still affected crops;
analysts reported that the condition of small grains and fruit trees
were worse than normal.