|
Economic activity in the Fifth District grew at a faster rate in June and July, led by stronger revenue growth in services and retail trade. Manufacturing continued to expand at a healthy pace in most industries. Commercial real estate leasing and construction increased somewhat more quickly in recent weeks while residential activity was mixed. Banks reported greater interest in residential mortgages and stronger demand for commercial loans. Although labor markets continued to be tight, wage pressures remained largely in check, except in the retail sector. In agriculture, recent heavy rains brought relief to some crops that had been stressed by unusually dry weather in June and July; however, there was flooding in some areas.
Retail Trade
Retail activity in the Fifth District experienced faster growth since our last report, particularly in the last several weeks. Revenue growth accelerated in July after growing only modestly during June. The retail labor market was exceptionally tight, with both employment and wage growth surging in recent weeks. Sales of big-ticket items and shopper traffic slowed somewhat in June, but both recovered in July.
Services
While most measures of District service-sector activity were little changed during the last two months, revenue growth accelerated sharply in June and remained strong in July. Growth in service-sector employment slowed in June, but more recently the pace rebounded. Wage growth was steady. Despite the signs of current strength, our sources again lowered their expectations of future demand.
Manufacturing
Manufacturing activity grew at a steady pace in recent weeks. Growth in shipments and new orders continued to be strong across most industrial sectors during June and July. Textile mills and furniture manufacturers, however, reported weaker demand. In North Carolina, a textile producer noted that he lowered his prices in July and said that excess capacity "[has] resulted in intense price competition." Manufacturing employment growth has been steady since May; sources again characterized labor markets as tight, with many reporting that finding skilled workers remained their primary concern. Contacts reported that increases in their costs were outpacing their ability to raise prices.
Tourism
Tourism in the Fifth District continued to strengthen since our last report. Most sources reported that activity during the Fourth of July holiday exceeded that of a year ago, partly because of more favorable weather. A hotelier on the Outer Banks of North Carolina noted that strong bookings made it difficult for visitors without reservations to find weekend accommodations there. In mountain areas, a source from West Virginia reported that interest in white water rafting had increased and that more people were "seeking refuge from urban areas" this summer.
Port Activity
Port activity was lower in June than in May, both for containerized and break-bulk cargoes. Overall export growth moderated in June, although port representatives noted an increase in automobile, agricultural, and paper product shipments. The pace of import growth also slowed during June despite a pick-up in shipments of agricultural and wood products.
Temporary Employment
Temporary employment agencies reported that the demand for workers increased slightly in recent weeks. Most agencies continued to have difficulty filling available positions. Several agencies were actively soliciting potential employees wherever they found people gathered, including local sporting events. One North Carolina agency noted that with the shortage of computer-skilled applicants, his firm had renewed its efforts to offer workers in-house computer training.
Finance
Lending activity in the District increased moderately in June and July. Commercial lenders that we contacted reported continued strong demand for loans. Lenders cited lower mortgage rates as the major reason for increased demand for residential mortgages. Consumer loan activity was spotty. Several bankers reported an increase in loan applicants with credit problems. A Virginia banker reported that he had recently become less inclined to make loans to customers with a history of bankruptcy.
Residential Real Estate
Reports of real estate activity from realtors and homebuilders were mixed across the District. Virginia realtors reported steady sales and higher customer traffic in recent weeks. They indicated that mid-priced homes continue to sell well in most areas of Virginia. However, several contacts in West Virginia and the Carolinas reported a slowdown in home sales in their areas. A Columbia, S.C., realtor suggested that consumer credit problems were slowing activity in that market. Builders in several areas of the District reported a rise in customer inquiries, but they noted that the increased interest had not yet boosted housing starts.
Commercial Real Estate
Commercial real estate activity expanded more quickly than in May, though the pace of advance slowed from earlier in the year. Office, retail, and industrial leasing activity grew more strongly across the District amid generally falling commercial vacancy rates and rising rents. An exception to this strong picture was Columbia, South Carolina, where rents weakened. Most sources noted an increase in overall construction, although we received fewer reports of speculative construction. However, a broker in Charlotte, N.C., went against the grain, remarking that in his area, there was "more [speculative construction] than we've had here in five years."
Agriculture
Although the remnants of Hurricane Danny brought heavy rains and flooding to the District in the latter part of July, the moisture may not have come in time to help all crops. Unseasonably dry weather, which prevailed throughout most areas of the District in June and early July, had already reduced yields of corn and some other field crops. In addition, a contact in Virginia noted that the recent excessive rains would increase the threat of blue mold on tobacco crops. However, the general consensus was that, on net, the rain would prove beneficial; one North Carolina analyst stated, "the rain is going to help a lot more than it will hurt."
|
Cleveland