WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Fifth District, published
Wednesday:

Commercial real estate leasing and construction was flat or
moderately improving in recent months, although pockets of weakness
persisted. Respondents around the District reported more construction
and absorption, especially in the industrial segment. Contacts at
several engineering and architectural firms confirmed that interest in
new construction projects increased, although demand remained well below
pre-recession levels. Construction activity in South Carolina was driven
by the recent expansion of manufacturing activity in the state, while
gains in West Virginia were associated with the emerging boom in natural
gas. One real estate developer in Charleston, South Carolina said that
rents had increased to the point where new construction is starting to
make sense. A developer in the Richmond area cited a rise in demand for
warehousing space, related to healthcare facilities and an increase in
on-line shopping activity.

Labor Markets. Assessments of labor market activity were mixed
since our last report. Several employment agency contacts saw somewhat
greater demand for temporary workers, and most expected demand to remain
strong for the remainder of the year. A Baltimore agent reported an
increase in demand for manufacturing workers, adding that manufacturers
were hurt by a severe shortage of trained workers. Several contacts said
that current hiring was focused on skilled positions, and they expected
that companies would continue to experience recruitment problems.
However, a representative at a Richmond staffing agency reported that
job orders continued to be steady and that more area companies were
hiring workers on a permanent basis than a year ago. A source in South
Carolina noted that the aerospace industry was investing heavily in new
technologies that would reduce the need to hire additional workers.
According to our latest survey, District wage gains in manufacturing
were slightly lower than a month ago, while the pace of wages in the
service sector increased.

Tourism. Tourism contacts reported strong bookings during the last
four to six weeks, and restaurants in tourist areas experienced solid
customer demand. Several hotel owners on the outer banks of North
Carolina said that spring got off to a strong start and summer rentals
were up. Memorial Day is the traditional summer kick-off for resorts,
and most were advertising special events for that weekend. A resort
owner in the mountains of Virginia said that he expected a record crowd
for the holiday. He added that lower gas prices and good weather boosted
bookings in recent weeks, following a winter season with weak demand due
to unusually warm weather. In addition, time-share rentals were strong,
and booking incentives were no longer necessary.

Agriculture. Rainfall across the District supplied much-needed
moisture to emerging field crops. In South Carolina, cotton planting was
slightly ahead of schedule, and planting of peanuts was well ahead of
its normal pace. However, rainfall delayed plantings of cotton and
peanuts in parts of North Carolina and Virginia. Excess precipitation
was also problematic for strawberry farmers in Virginia, causing fruit
spoilage; the problem was compounded by a lack of pickers. Corn and
soybeans began to emerge in Maryland, while farmers in West Virginia
reported that warm weather put planting of corn and soybeans ahead of
schedule. Lastly, the peach harvest was under way in South Carolina, and
cantaloupe and watermelon planting was complete.

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** Market News International Washington Bureau: 202-371-2121 **

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