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The Fifth District economy advanced at a quicker pace in the weeks since our last report. Retailers reported bustling sales--especially of big-ticket items--and services-sector activity rebounded from several months of sluggishness. Manufacturing continued to strengthen; both shipments and new orders rose sharply in recent weeks. In real estate markets, the pace of development and sales remained rapid, and financial institutions across the District reported generally strong lending activity. Labor markets tightened further but, outside of manufacturing, wages and prices increased only moderately in most sectors. In agriculture, farmers made good progress with their spring planting, but crop prices remained low.
Retail
Retail sales surged in March and early April as warm weather and Easter holiday merchandise lured shoppers to District stores. After two months of lackluster performance, big-ticket sales rebounded in recent weeks with sales of automobiles and computer equipment being particularly strong. One contact in Washington, D.C., noted that despite Y2K concerns, lower computer prices enticed buyers; in his words, "It's just too tempting for businesses to upgrade in this price environment." Retailers increased their payrolls since the last Beige Book and wages rose somewhat faster, although retail prices changed little. Contacts remained optimistic regarding future sales; a manager at a general merchandise store in Charlotte, N.C., said that "there is no indication that shopper interest will slow any time soon."
Services
Revenues at services firms expanded in recent weeks after several months of moderate declines. Robust activity in real estate markets helped boost revenues at law and mortgage-service firms. Resorts and hotels also reported higher receipts. Computer consulting firms experienced healthy demand as clients addressed Y2K concerns and upgraded networks. Employment increased in March and early April for the first time in several months. Wage growth, however, remained moderate and prices eased slightly.
Manufacturing
Manufacturers' shipments, new orders, and capacity utilization rose more quickly in recent weeks. Contacts in the lumber, electronics, and plastics industries reported particularly strong business activity. Furniture manufacturers were upbeat as well; several mentioned brisk sales at the recent International Home Furnishings Market in High Point, N.C. Port representatives at Charleston, S.C., and Hampton Roads, Va., noted a resurgence in exports in March. In labor markets, wages and the manufacturing workweek rose, but employment was little changed. Reports of higher prices were somewhat more widespread. A contact at a large tobacco processing firm in North Carolina told us that his company's prices would rise because of the costs of settling recent litigation. In addition, an industrial packaging supplier in Greenville, S.C., noted that paper and film prices were headed upward--the first increases he had seen in three to four years.
Finance
District loan officers reported that overall lending activity remained strong in March and April despite less rapid growth in mortgage refinancings. Commercial lending continued to be buoyed by a vibrant regional economy and attractive interest rates. Residential mortgage lending was boosted by a solid housing market but was slowed by dwindling demand for refinancing; as a Roanoke, Va., realtor put it, "Everybody has already refinanced." Although several bankers reported taking a closer look at loan applicants' credit worthiness, credit standards were little changed.
Real Estate
Residential real estate activity continued to expand at a solid pace in the weeks since our last report. Realtors in many areas reported substantial increases in home sales, particularly those in the upper price brackets. In Baltimore, one realtor described upper end residential activity as "busting at the seams." Home prices were also rising in Richmond and northern Virginia. Realtors in those areas reported multiple contracts and sales prices of 10 to 15 percent above asking prices in some areas. The robust residential building activity has strained materials resources in many areas of the District. Drywall, in particular, was reported to be in short supply in several locations.
Commercial real estate activity remained at a high level in most areas, although there were fewer signs of an overheated market. A Richmond, Va., realtor indicated that things have remained "fairly quiet" while several realtors in the northern Virginia area indicated that class A office space is generally more available. Retail leasing activity picked up in North Carolina; a Raleigh, N.C., realtor described the restaurant business there as "getting out of hand." In contrast, a developer in Charlotte, N.C., expressed concern about possible office market overbuilding in that area.
Tourism
Tourist activity rose throughout the District in March and April. Bookings at area resorts for the Easter holiday were much stronger than a year ago, partly because of the increased popularity of "spring break" vacations at coastal resorts. Hoteliers also attributed the pickup in resort activity to higher consumer confidence and unseasonably favorable weather. In Washington, D.C., mild weather and publicity about beavers helped draw a record 700,000 to the National Cherry Blossom Festival.
Temporary Employment
The demand for temporary workers escalated further in the weeks since our last report. Workers were said to be in short supply, and those with computer programming skills were "calling the shots" in hiring and wage negotiations, according to a recruiter in Columbia, S.C. In the Carolinas, the demand for production workers strengthened as manufacturing has rebounded in recent months. A Charlotte, N.C., employment agent said that finding qualified workers was like "finding an oasis in the desert--nearly impossible." Wages grew at a quicker pace, but not as rapidly as many contacts had anticipated. Future demand for workers was expected to remain high, and many contacts expected substantial wage hikes within the next six months.
Agriculture
District farmers made good progress on spring tillage and planting in recent weeks. Planting was reported to be on schedule for most crops. Farmers in some areas need additional rainfall, however, for proper germination and development of crops. Nevertheless, topsoil moisture levels were adequate in most areas, although moisture levels in North Carolina were drifting towards short. Crop producers' primary concern remained low grain and soybean prices. In the livestock sector, hog prices have rebounded, but hog producers may face an uncertain future because of strained finances resulting from last fall's low prices.
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Cleveland