WASHINGTON (MNI) – The following is the first part of the latest
Beige Book survey of economic conditions in the Federal Reserve’s Fifth
District, published Wednesday:
FIFTH DISTRICTRICHMOND
Overview.
District economic activity generally flattened or improved slightly
since our last report. Manufacturing activity was little changed in late
November through mid December, while port activity slowed. Retail
reports were mixed; notably, several car dealers reported higher sales
of used and new vehicles. Non-retail services firms also reported
stronger revenues in recent weeks. In addition, most tourism contacts
indicated bookings were up. In finance, however, loan demand continued
to be weak, with the exception of commercial loans. Likewise,
residential real estate activity generally declined. We received mixed
reports on commercial real estate activity. Manufacturing employment
declined somewhat, while the average workweek ticked up and wages
advanced in line with our last report. Retailers reduced their payrolls
and wages flattened, while non-retail services providers added to their
payrolls and average wages increased in that subsector.
Manufacturing.
District manufacturing activity remained flat since our last
report. Our latest survey showed little change in shipments, but a
slight increase in new orders. A producer of residential doors reported
that business at his firm remained depressed. Similarly, a furniture
manufacturer said that demand was generally sluggish across all
categories, particularly for residential furniture. In contrast, a
fabricated metal producer cited an improvement in December’s order
volume, which he attributed to customers placing orders in advance of
higher basic metals prices. That increase in orders allowed his company
to operate at capacity and avoid employee layoffs. Moreover, an
automobile parts manufacturer ordered new manufacturing equipment due to
increased demand and the need to reduce employee overtime. According to
our survey respondents, both raw materials prices and finished goods
prices grew at a notably slower pace than a month ago.
Port activity in the Fifth District slowed in recent weeks, with
imports coming in below earlier expectations. Several officials reported
that imports have turned flat on a year-over-year basis, after modest
gains during the summer had raised hopes of continued improvements
through the remainder of the year. One analyst stated that the typical
autumn bump in retail orders did not occur this year. A modest uptick
of imports is still expected in January, ahead of Asian plant closings
for the Chinese New Year in February. In contrast, most port officials
expected robust exports, especially for non-container goods. A late
harvest has led to increases in grain exports, according to one
official. Nonetheless, shipping rates are low and carriers are losing
money, causing several analysts to expect increased pressures among
carriers to consolidate.
Retail.
Retail merchants gave mixed sales reports, while wholesalers
generally indicated a pickup. The manager of a chain discount store in
North Carolina described sales as erratic, and a contact in the
Tidewater area noted that sales were unchanged, even with increased foot
traffic. Unusually warm weather in the District depressed sales of
winter apparel. Toys and electronics, particularly televisions, moved
briskly in recent weeks. A retailer told us that customers have returned
as much as a third of the items previously placed on lay-away before
finishing the payments, because, customers said, they need the money.
Although big-ticket sales were down slightly, there were reports of
improvement. Jewelers generally reported robust sales. Although higher
prices for gold and precious gems damped sales at some stores, other
items such as silver remained in demand. Rising cotton prices continued
to push up apparel prices. According to several car dealers, strong
used-vehicle demand increased trade-in equity. Low interest rates and
the rising average age of vehicles on the road also helped move new
cars. On the whole, retail price increases were smaller since our last
report.
Services.
Revenues at non-retail services firms accelerated in recent weeks.
Hospital and other healthcare contacts noted that mergers have increased
among smaller hospitals and physician practices, as changes in
healthcare roll out. Nursing home executives also expressed concern
about reduced Medicare payments and the inability of potential
resident-care patients to sell their homes. Revenues rose more quickly
at medical records management firms, temp staffing agencies, and
telecommunications firms. In addition, a pickup in business at
engineering firms was noted in recent weeks. An engineering contact in
West Virginia commented that old projects that have been on the shelf
were proceeding. Prices at services firms increased at a somewhat faster
pace since our last report.
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** Market News International Washington Bureau: 202-371-2121 **
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