October 27, 2004 Federal Reserve Districts Fifth District--Richmond

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

The Fifth District economy expanded at a quicker pace in September and the first half of October as the services sector rebounded from an August lull and manufacturing production gained further momentum. Revenues at services businesses picked up appreciably in recent weeks and retail sales increased in September for the first time in several months. Manufacturing shipments in September were notably higher and employment in the sector expanded modestly. While home sales were reported to be slowing in some areas, District real estate agents said that the demand for housing remained relatively strong. Prices surged for some raw materials used in manufacturing and construction, but contacts said that prices otherwise were rising only modestly. In agriculture, crop harvesting and small grain planting were generally ahead of schedule and pastures were in good to excellent condition. Services District services businesses said revenues strengthened in recent weeks. Government contractors in Virginia and West Virginia reported steady or rising revenues while a contact at a financial services firm in central North Carolina said he was seeing "improved sales." Several organizations reported increased hiring, including an environmental services firm in central Maryland and a community college in Virginia. There were scattered reports of higher prices: contacts at a Virginia airport and a central North Carolina freight services company, for example, said they raised prices to cover rising fuel costs, but overall price increases in the sector were generally modest. Retail Retail revenues improved somewhat during the last six weeks. Several grocery stores in Virginia and West Virginia reported higher customer demand and the owner of a South Carolina building supply business told us revenues increased and that he had hired more employees. In contrast, a large building supply company in central North Carolina said sales slowed and automobile dealers reported mixed sales. Retail contacts said prices advanced more slowly in recent weeks. Manufacturing District manufacturing activity strengthened further since our last report as shipments expanded at a quicker pace and capacity utilization rose. A plastics manufacturer in North Carolina characterized business activity as "pretty good," noting that both shipments and new orders increased in September and contacts expected further increases over the next six months. A Maryland electronics equipment manufacturer reported that stronger product demand in the U.S. and in Mexico had boosted demand at his firm. Weakness persisted, however, in the textiles and apparel industries. Contacts in these industries generally reported sales declines and said they needed to trim their inventories as a result. District manufacturers reported a pickup in employment and modest wage growth in September. While several manufacturers were concerned about sharply higher prices for oil, steel, and aluminum, respondents generally reported that overall raw materials prices rose at a moderate pace. Finance District loan officers reported that loan demand was generally flat in September and early October. A banker in Charlotte, N.C., said that commercial loan demand improved, particularly from small- to medium-sized businesses, while a lender in Richmond, Va., noted a pickup in local and state government borrowing. But several industry contacts told us that businesses were reluctant to take on debt, with many waiting for sales to improve before borrowing. And a banker in Charleston, W.V., said that commercial lending was little changed in that area because the local economy remained "soft." Residential mortgage lending in the District was sluggish as well; mortgage originations for new homes held up in many areas, but refinancing activity dwindled. Real Estate Fifth District real estate agents continued to report a slowing in housing activity since our last report. An agent in Virginia Beach, Va., said his clients were simply not "moving as fast" to purchase homes. A contact in Richmond, Va., also reported slowness in home sales in recent weeks, as did an agent in Odenton, Md., who noted that the market seemed to be "returning to normal" after the frenzied pace earlier in the year. In contrast, home sales held their own in Fredericksburg and Vienna, Va., where markets were described as "outstanding" and "as strong as ever." Home prices continued to rise in Northern Virginia and in Washington, D.C., but were reported to be stable in most other areas of the Fifth District. Realtors reported little change in Fifth District commercial leasing activity during the last six weeks. A contact in Richmond, Va., noted "We are seeing some musical chairs," as existing tenants move from building to building, but "there hasn't been any substantial recent growth in terms of new clients." Office and industrial leasing was stagnant in most areas in recent weeks. Retail leasing, which has been the strongest commercial market sector this year, remained stalwart in September and October, although contacts in Raleigh, N.C., Richmond, Va., and Washington, D.C., cautioned that a slowdown could be imminent. "Retail has really been booming for the last couple of years, but that success may have led to substantial overbuilding of retail space," observed a Realtor in Raleigh, N.C. Rents and vacancy rates across sectors were generally unchanged in recent weeks. Tourism District tourist activity strengthened since our last report. Contacts in both coastal and mountain areas reported increased bookings compared to a year ago. A hotelier in Virginia Beach, Va., told us that they were at capacity during Columbus Day weekend. A contact in Myrtle Beach, S.C., said that tourism declined in August because of hurricanes and storms, but business picked up in September and group bookings were strong. A manager at a mountain resort in Virginia noted that they were "packed" over the holiday which he attributed to beautiful fall weather. Temporary Employment Contacts at Fifth District temporary employment agencies continued to report stronger demand for workers in recent weeks. A contact in Hagerstown, Md., said that solid growth in the local economy was creating strong demand for warehouse and distribution center workers. And an agent in Raleigh, N.C., expected a pickup in demand for temporary workers over the next few months because there were fewer qualified job candidates to fill permanent positions and firms seemed to have more funds available to hire temporary employees. Agriculture Cooler temperatures coupled with drier conditions allowed Fifth District farmers to make steady progress in small grain plantings and harvesting activities. Farmers in Virginia, West Virginia, and the Carolinas moved quickly to plant small grains and winter crops during the rain-free period. Although corn harvesting in Virginia has been somewhat delayed due to a lack of space at storage facilities, corn harvesting activity in other areas of the District was generally ahead of schedule. In addition, pastures and livestock were reported to be in good to excellent condition in most areas of the District. Return to top Cleveland Atlanta