| Skip to content
|
Overview
The Fifth District economy expanded at a moderate rate in November and December, led by continued signs of a rebound in manufacturing activity. Manufacturers reported solid gains in shipments and December new orders posted their strongest increase in over a year. District retailers recorded generally steady sales growth through the holidays while services firms said their revenues increased only slightly. In real estate markets, residential activity remained upbeat and commercial leasing activity picked up during the final two months of 2003. District bankers noted somewhat higher demand for commercial loans but said that slower refinancing activity put a lid on residential mortgage lending. Tourism was strong, with special events and an encouraging start to the ski season supporting activity. In agriculture, excessive precipitation hampered field work and limited small grain planting.
Retail
Overall, retailers in the Fifth District experienced steady sales growth over the holiday season, with sales generally meeting projections. A discount store in Chesapeake, Va., reported strong customer traffic and revenue growth in December in part because area competitors held off price cuts until just a few days before Christmas. Hardware and lumber stores in Columbia, S.C., and Richmond, Va., reported that their sales grew modestly. But not all stores posted gains. Contacts at a department store and a large bookstore in textile-dependent central North Carolina said they met their sales goals, but added that they had set their revenue targets somewhat below year-ago levels. Most automobile dealers in the District said that sales grew moderately and they looked for a pickup in automobile sales in coming months, leading some dealerships to increase hiring.
Services
District services firms said customer demand grew only slightly in November and December. Despite heightened terror threats, District airports reported strong passenger traffic in November and December. In addition, a Baltimore, Md., financial services firm said customer demand remained positive and they were hiring. But several professional, scientific, and technical services firms reported that their business had flattened toward year-end, as did an administrative and support services firm in lower Maryland. Adding to the lackluster tone, freight transportation operations in North Carolina and Maryland said that demand was essentially unchanged from six weeks earlier.
Manufacturing
District manufacturing activity grew at a solid pace in November and December, led by modest growth in shipments and a strong increase in new orders. New orders increased notably in December, especially at primary metal and industrial machinery manufacturers. An electronics equipment manufacturer in Maryland told us that while his shipments were nearly flat in December, new orders picked up and several of his customers had asked for expedited delivery in the months ahead. A North Carolina boat manufacturer reported increased sales and suggested that a "better economy" was boosting the demand for boats, leading him to expand hiring. In contrast, apparel and textile manufacturers saw few signs of firming in recent months. Contacts in these industries said they continued to lose market share to Far East producers and several noted that they would trim capital spending further in 2004 because of reduced sales, lower capacity utilization and poor cash flow.
Finance
District bankers reported negligible loan growth in November and December as softness in residential mortgage refinancing largely offset modestly higher commercial lending. Although mortgage lending for new purchases was steady, residential mortgage refinancing dwindled; a banker in Richmond, Va., said the "refinancing boom was gone," adding that 30-year mortgage rates would have to drop below 5-3/4 percent to spark another round of refinancings. On a brighter note, contacts said demand for commercial loans rose. A Charlottesville, Va., lender said commercial lending had been stoked in recent weeks as local economic conditions strengthened and area retailers netted higher sales. Most financial contacts expressed optimism regarding lending prospects for 2004; a Richmond, Va., banker, for example, expected commercial lending to grow by 7 percent in the upcoming year.
Real Estate
The pace of residential real estate activity remained generally strong since our last report, although the holidays damped buyer traffic somewhat. A real estate agent in Fredericksburg, Va., described the market there as "incredible" and "across-the-board-good" while an agent on Virginia's Eastern Shore said that housing demand was "pretty hot right now." A realtor in Odenton, Md., said that houses were staying on the market a little longer and some closings were being put off until after the holidays, but she expected sales to be "wild" again in January. An agent in Fairfax, Va., was less upbeat, however, noting that sales growth there had trailed off in recent months though the level of activity remained high. Home prices were reported to be generally flat across the District.
According to commercial realtors, leasing activity in the Fifth District picked up over the final two months of 2003. "Conditions are surprisingly good here--the year finished with a flurry," noted a contact in Columbia, S.C., where leasing activity in office, retail, and industrial space was strengthening notably. Activity was also on the upswing in Charlotte, N.C., where a realtor reported increased interest in industrial space. Strong conditions continued in the Washington, D.C., and Richmond, Va., retail markets--the Washington, D.C., contact was "pretty upbeat" about leasing activity and a Richmond realtor reported "smooth sailing" over the past two months. Overall, rents held firm and vacancies were down slightly across the District.
Tourism
Tourist activity strengthened in the District in late November and December. Celebratory events associated with the First Flight Centennial in Kitty Hawk, N.C., boosted tourism on North Carolina's Outer Banks in mid-December. In Myrtle Beach, S.C., tourism received a lift as military personnel began to return from Iraq. Contacts at several ski resorts in western areas of the District said that holiday bookings in December set records. A Virginia ski resort operator reported that heightened concerns over airline safety since December 21 had generated increased business while his counterpart at a resort in West Virginia credited ample snowfall for the increase in activity there.
Temporary Employment
Contacts at temporary employment agencies in the District generally reported modest increases in the demand for workers since our last report, and most expected continued increases in demand in the coming year. An agent in Raleigh, N.C., said he was seeing strong demand for sales representatives, accountants, and engineers, adding that all indications pointed to even stronger hiring of temporary workers in 2004. And an agent in Gastonia, N.C., also expected stronger demand for placements over the next few weeks citing more spending by consumers and a brighter economic outlook.
Agriculture
Excessive precipitation since our last report hampered field work and limited small grain planting activity in many areas of the District. Farmers in North Carolina made only slight progress in harvesting cotton and soybeans because of the rainfall. Soybean harvesting was behind schedule in Maryland as well. Many field activities were delayed in Virginia and West Virginia because of severe flooding in late November. On a brighter note, cotton and soybean harvesting was nearing completion in South Carolina and the apple harvest was finished in Virginia.
|
Cleveland