| Skip to content
|
Fifth District economic growth continued to slow in December and early January. Seasonally-adjusted retail sales fell at automobile dealerships, and were weak at other stores, as sagging consumer confidence and unusually cold weather reduced spending. Service providers reported lower revenues and employment. Manufacturing output continued to slip somewhat in December and new orders dropped sharply, but manufacturers remained optimistic that conditions will improve by midyear. In the real estate and financial sectors, lower mortgage rates boosted December activity but lower consumer confidence damped expectations of business activity in coming months. Turning to District labor markets, strong wage gains continued in retail, but wage growth was moderate elsewhere. Consumer prices continued to rise at a modest pace.
Retail
District retailers reported that sales changed little in December from a year earlier. Also, heavier-than-normal price discounting was needed to sell much of their holiday merchandise. Contacts at big-box stores indicated that their holiday sales fell short of last year's levels. In addition, a large retailer in Columbia, Md., said that their sales fell sharply and noted that customers were "keeping their money closer to the pocket." In parts of the District, bad weather slowed customer traffic and put a damper on post-holiday sales. Automobile dealerships generally reported lower sales in recent weeks, and several said that their inventory levels rose as a result. Seasonally-adjusted retail employment growth slipped in December, but wages continued to rise at a brisk pace. Retail prices rose at a slower rate, in part because of extensive price discounting.
Services
District firms reported lower revenues in December. Contacts at services companies in Charlotte, N.C., said that banking industry restructuring had reduced demand for consulting and other services by the banking industry. Other firms noted cutbacks in hiring and little change in wage levels. Firms reported that prices rose only slightly in December.
Manufacturing
Activity continued to contract in December. Shipments declined at a slightly faster rate in recent weeks, and new orders and backlogs dropped sharply. A paper manufacturer in Charlotte, N.C., told us that new orders were at the lowest level since 1984. Several paper and rubber product manufacturers reported that increases in raw materials and energy prices were squeezing their profit margins. In the textiles industries, contacts indicated that competition from abroad continued to hold prices in check. In spite of the recent declines in activity, most manufacturers remained optimistic about their future prospects and many expected orders and shipments to rebound by midyear. Both manufacturing employment and the average workweek slipped, while wages rose moderately.
Real Estate
Residential Realtors and homebuilders reported that growth slowed in December, as the beneficial effects of lower mortgage interest rates were more than offset by failing consumer confidence and colder-than-normal temperatures. A Realtor in Asheville, N.C., noted that buyers were looking longer before making a purchase. A counterpart in Greensboro said that sales in that area fell "a fair amount" and inventories of starter homes remained high. Homebuilders throughout the District reported sluggish growth in housing starts. Contacts said that subcontractors were available and that the costs of building materials were slightly lower. Home prices were steady across the District.
Commercial Realtors reported softer growth in leasing and construction activity in recent weeks. Realtors in the District of Columbia said that the demand for office space had slowed in part because a number of struggling dot-com companies had recently backed out of rental contracts. Commercial Realtors in Maryland, Virginia, and the Carolinas reported substantially slower growth in all types of commercial construction, with very few speculative projects currently underway. On a stronger note, contacts in Raleigh, N.C., and Columbia, S.C., reported a pickup in leasing activity in the retail sector and they said that the supply of Class A office space remained tight. Commercial rents across the District were generally stable to moderately higher.
Finance
District loan officers reported that lending activity grew at a somewhat slower pace in December. Commercial bankers noted that the demand for loans remained at a moderate level but they were increasingly "watchful" for signs of deteriorating financial conditions in cyclical industries, particularly construction and manufacturing. A commercial lender in Greenville, S.C., reported that a smaller percentage of manufacturing plants in that area were expanding, slowing the demand for loans. A banker in Chesapeake, Va., said that she was still lending to companies in weakening industries, but was making sure her bank was "compensated for assuming additional risk." Residential mortgage lenders reported moderately slower demand growth; several, however, noted that further declines in interest rates this year would likely spark more refinancing in coming months.
Tourism
Tourist activity strengthened further in December. Contacts at area ski resorts reported strong patronage in recent weeks, particularly during the week between Christmas and New Year's Day. A manager at a ski resort in Virginia said that occupancy rates for his resort's time-share units reached a record high during the holidays. He attributed the increase to colder-than-normal weather and a good snow base. A contact at a West Virginia ski resort reported a sharp rise in spending at retail shops there. Along the District's coast, tourism remained vibrant despite the unusually cold weather.
Temporary Employment
Demand for temporary workers continued to be mixed in recent weeks. A Charleston, W.V., agent said that he had seen the demand for temporary industrial workers rise sharply in recent weeks. Agency contacts in Maryland and North Carolina, however, reported weaker demand for workers although several noted that the holidays were partly to blame. A Hagerstown, Md., agent added that he expected a slowing economy to lead to further declines in his business in the first quarter of the year. Wages of temporary workers remained generally steady since our last report.
Agriculture
Generally mild weather in the first week of December allowed District farmers to make good progress on late fall fieldwork. By mid-month, they had harvested most fall crops and had seeded small grain and winter grazing crops. Later in the month, however, snow cover and colder-than-normal temperatures led to greater use of feed and hay.
|
Cleveland