| Skip to content
|
The pace of economic activity in the Fifth District continued to cool in September and early October as weakness in housing markets persisted and services firms reported slower revenue growth. Home sales remained sluggish across most of the District, while the demand for mortgages softened further. Reports from District merchants were also less rosy as retail sales--particularly big-ticket categories--continued to pull back. Additionally, widespread, drought-like conditions curbed crop yields and delayed winter plantings. Assessments of other sectors were more upbeat, however. District manufacturers noted gains in shipments and new orders, and tourism contacts said activity had been solid since the Labor Day holiday. Moreover, commercial real estate agents reported that leasing activity continued to be steady. Turning to labor markets, the pace of hiring moderated somewhat in recent weeks, though District factories added workers for the second straight month. On balance, price growth in the District was little changed since our last report.
Retail
District contacts reported generally softer retail sales in recent weeks due in large part to continued weakness in big-ticket categories. The general manager of a department store in the Washington, D.C., area reported that stronger apparel sales had been overshadowed by a further pullback in furniture sales. Sales of automobiles and light trucks were also slower across the District. A West Virginia automobile dealer said, "the only people buying are the need buyers, not the want buyers." Additionally, an executive at a hardware chain in central Virginia told us that particularly dry weather during late summer and early fall limited sales of lawn and garden items. On a brighter note, a department store manager in central North Carolina said merchandise had been moving at a steady pace since our last report. On the employment front, retailers across the District said they had begun hiring seasonal employees and most planned to staff the upcoming holiday period at about year-ago levels. Retail price growth was little changed in recent weeks.
Services
Revenue growth at District services firms slowed somewhat since our last report. Contacts at professional, scientific, and technical services firms, in particular, reported softer revenue growth as housing market weakness began to constrain demand for services. An executive at a Maryland technology firm said construction-related clients had begun to delay large projects and a contact at a northern Virginia web-services company noted concern about his business prospects going forward because of the recent housing woes. In contrast, a Virginia airport executive said passenger traffic was up appreciably over the same time last year. In labor markets, the pace of hiring slowed at District services providers, while price growth was generally contained.
Manufacturing
District manufacturers reported that activity expanded at a quicker pace in late August and September. Contacts told us that shipments grew briskly, new orders picked up and District factories added workers for the second straight month. Manufacturers in the electronics, fabricated metals, plastics and transportation industries recorded the strongest gains since our last report. An electronics producer in Maryland told us that domestic orders were "showing some signs of life" and a textile manufacturer in North Carolina said business had strengthened considerably in September. Similarly, a plastics producer in North Carolina said that business had been good and was optimistic about his future prospects as he entered the "busy fall season." Reports on prices were mixed. Contacts indicated that raw material prices grew slightly faster than last month, while growth in finished goods prices increased more slowly.
Finance
On balance, demand for home mortgages continued to weaken across the Fifth District over the last six weeks. Contacts in Raleigh, N.C., and in Charlottesville, Va., reported a significant slowdown in lending activity, while a contact in Greenville, S.C., described only a minor pullback. Lenders also noted that a significant portion of their business had shifted from mortgage originations to refinancing adjustable rate products. Mortgage rates remained generally unchanged across the District in recent weeks, while credit standards continued to be taut in most markets. On the commercial lending side, demand softened with pronounced slowdowns in Charlottesville, Va., and in Charleston, W.Va. Reports on interest rates were mixed. Contacts in Charlotte, N.C., and in Charleston, W.Va., reported slightly lower rates for borrowers with solid credit, while a contact in Baltimore, Md., reported no change. Credit standards on commercial mortgages remained fairly tight across most of the District.
Real Estate
Fifth District Realtors continued to report generally sluggish home sales in September and early October. An agent in Richmond, Va., told us that buyers remained on the sidelines, while a contact in Fredericksburg, Va., advised potential sellers to "stay where you are unless you absolutely have to sell." Likewise, an agent in Greensboro, N.C., reported elevated home inventory levels, commenting that sellers who are not hard pressed to sell have chosen to "just sit and wait." On the other hand, there were scattered reports of improving conditions. A Realtor in Odenton, Md., noted experiencing a "boatload of activity" in recent weeks and an agent in Greenville, S.C., said that an influx of relocated workers had helped to stabilize his market. Looking ahead, a contact in northern Virginia expected home sales to strengthen in the coming months as financial market concerns had subsided somewhat. Reports on home prices generally indicated very modest appreciation since our last report.
Turning to commercial real estate, the pace of leasing activity in the Fifth District was unchanged over the last six weeks. Contacts in Charlotte, N.C., Greenville, S.C., Richmond, Va., and Charleston, W.Va., reported steady leasing activity across all sectors, while an agent in Washington, D.C., said "activity was stable, though slower than this time last year." Rents were firm for the most part and vacancy rates were generally unchanged. On the investment front, contacts said deals were taking longer to complete as developers and financiers were exercising more caution. Additionally, agents in Washington, D.C., and in Columbia, S.C., noted that some projects had been shelved or canceled altogether. On the other hand, a Richmond, Va., Realtor said "there is still a lot of money out there" and a Baltimore, Md., Realtor reported that he was still seeing "lots of money chasing deals."
Tourism
Reports on tourist activity were generally positive. Along the coast, contacts in Myrtle Beach, S.C., and in Virginia Beach, Va., told us that bookings for the Columbus Day weekend were about on par with a year ago. In contrast, a contact on the Outer Banks of North Carolina reported somewhat stronger activity, which she attributed to a relatively quiet hurricane season. A manager at a mountain resort in Virginia reported that sales of time shares were going well and that the warm, early fall weather had attracted more golfers. Looking ahead, the contact was concerned that ongoing water restrictions might hamper snowmaking and limit ski operations this winter.
Temporary Employment
Fifth District temporary employment agents reported generally stronger demand for workers since our last report. A contact in Raleigh, N.C., reported increased demand for workers, while an agent in Cary, N.C., said hiring had been brisk in recent weeks. Contacts were optimistic about demand in the months ahead--a Bethesda, Md., contact expected stronger than usual demand for workers over the next several weeks ahead of the upcoming holiday season. On a less rosy note, contacts in Richmond, Va., and in Hagerstown, Md., reported somewhat weaker activity in September stemming from ongoing client concerns regarding the health of financial markets.
Agriculture
A dry September intensified the Fifth District's ongoing drought, causing state officials in Virginia and in the Carolinas to seek federal aid and prompting mandatory water-use restrictions in many areas. In addition, depleted ground moisture delayed plantings of winter crops in many regions. District agricultural analysts reported that low forage supplies and higher feed costs led livestock producers to continue to cull their herds, particularly in South Carolina and Virginia. Additionally, the corn harvest was almost complete in South Carolina and Virginia with yields varying widely, while soybean yields were below par in Maryland, South Carolina and Virginia. Despite the wide footprint of the drought, a few pockets of the District received more normal rainfall in recent weeks. Parts of Maryland, for example, saw light rains and cooler temperatures, allowing farmers to plant small grains, harvest corn and prepare fields for the upcoming winter.
|
Cleveland