WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Fifth District, published
Wednesday:
FIFTH DISTRICTRICHMOND
Overview.
Recent reports on economic activity in the Fifth District mostly
described conditions as either unchanged or slightly improved. The more
upbeat reports came from the retail sector, which rebounded in November,
and the tourism sector, which continued to post moderate improvement.
The agricultural sector also enjoyed a good harvest. Reports on
manufacturing activity indicated little change over the last month,
following several months of contraction. Likewise, the service sector
was generally characterized as being flat, although a few bright spots
were noted. Other sectors, including finance and real estate, reported
generally mixed conditions. We received a wide variety of reports on the
labor market, ranging from lower employment in the retail sector to
several firms having trouble finding workers. Retail prices rose more
rapidly than in our last report, as did service prices and commodity
input prices.
Manufacturing.
District manufacturing activity was little changed in November. Our
latest survey showed virtually no change in shipments and orders across
firms, after having indicated declining activity over the past four
months. A furniture manufacturer reported a slight firming of new
orders, but noted that cancellations had increased. He added that the
net change was small and that uncertainty about the economy was holding
back demand. Similarly, a textile mill producer said that his company
expanded production to a seven-day workweek in order to accommodate new
orders. Unfortunately, they ran out of yarn and cut back to a five-day
week until suppliers could catch up. An electrical component producer
said that flooding in Thailand had lowered production. He added that his
company will have serious trouble meeting his customers’ orders during
the next three-to-six months. Also, an electrical equipment manufacturer
cited a significant slowdown in order intake due to uncertain global
economic situations. He stated that firms were slowing the rate of their
order placement. Raw material prices grew at a somewhat faster pace than
a month ago, according to survey respondents, while prices for finished
goods grew more slowly.
Retail.
Retail sales rebounded in recent weeks, with apparel and department
store sales leading the improvement. However, some retail and wholesale
contacts remained cautious regarding inventory and expansion. A contact
at a large pharmacy in South Carolina and a distributor to department
stores both reported solid sales growth. Several auto dealers reported
stronger sales. A jeweler in Charlotte, North Carolina remained guarded
about the economy, and remarked that he is “only buying what is
necessary”. In addition, a large chain store for homebuilder supplies
plans more expansion overseas than domestically. Retail prices rose at a
somewhat faster pace since our last report.
Services.
Firms reported generally flat revenues since our last report,
although a few contacts indicated that demand strengthened. A Baltimore
contact noted that local unemployment had reduced the demand for daycare
services, and several advertising firms and telecommunications-related
businesses reported little change in demand. In contrast, revenues were
up significantly for some restaurateurs in the Charlotte, North Carolina
region. In addition, a central North Carolina hospital began to add a
broad range of specialty physicians and associated staff, and other
District healthcare facilities hired technical personnel to meet
changing federal requirements for healthcare facilities. Non-retail
services prices rose more rapidly in recent weeks.
Finance.
Loan demand in the District continued to be mixed. A major lender
in the District reported that small business loans at his bank were
improving, with much of the demand stemming from the need to expand
production and upgrade office equipment and software. An official for a
small bank cited a strengthening commercial loan pipeline, resulting
from larger banks in his market area shedding customers. A banker who
specializes in export financing noted an uptick in demand, but added
that many small businesses were not able to meet the bankfs lending
standards. Several bankers noted continued strength in mortgage
refinancing. However, few lenders were issuing new mortgages, and
bottlenecks in the appraisal process were delaying closings. In
contrast, a central Virginia banker described loan demand as relatively
weak, with most applicants failing to meet qualification standards. And
a banker on the Eastern Shore reported that loan demand remained weak,
with “no demand for business expansion loans.” Several bankers and
small commercial contractors stated that getting approval for new
construction loans was extremely difficult, due to tight credit
standards and a poor outlook for profitability.
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** Market News International Washington Bureau: 202-371-2121 **
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