The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed November 28, 2007

Federal Reserve Districts

Fifth District--Richmond

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Economic conditions in the Fifth District weakened somewhat in October and early November as continued softness in retail sales and housing markets trumped stronger revenue growth at services firms. District retailers said the pullback in sales and shopper traffic intensified during the early weeks of the holiday shopping season. Housing activity also softened further as the pace of home sales continued to cool, inventory levels moved higher, and reports of price reductions became more widespread. Home mortgage demand softened as well. Adding to the softer tone, extremely dry conditions continued to hamper farm operations in many areas. Reports from other sectors were more upbeat, however. District service providers posted stronger revenues during the last six weeks, while tourist activity advanced at a healthy clip. Manufacturing contacts reported a slight uptick in production during early November and the leasing of commercial real estate space was steady. On the employment front, the pace of hiring eased, though District labor markets remained generally tight and wage growth edged higher. Prices at District firms rose modestly since our last report.

Fifth District retail sales activity softened further in recent weeks. Contacts reported that activity in big-ticket categories--particularly automobiles and light trucks--continued to slump. Retailers also said a prolonged stretch of mild temperatures in October and early November had curbed demand for cold-weather items. Shopper traffic drifted lower as well. Looking ahead, District merchants were less optimistic about their sales prospects for the upcoming holiday season. In response, contacts reported that big-box chains operating in the District had already begun to roll out holiday discounts--well ahead of Thanksgiving. A Richmond, Va. merchant said he was surprised to see the national chains "break price" so early. Turning to employment, retail wages grew modestly, while the pace of hiring tapered off somewhat. Retail price growth edged higher since our last report.

Revenue growth at District services firms advanced at a faster clip over the past six weeks. Contacts at healthcare, administrative and professional services firms, in particular, reported steady demand in recent weeks. In addition, a contact at a District insurance provider said his firm was on solid footing following a "very benign hurricane season." Going forward, some contacts expressed concern about the potential impacts of rising energy costs. On the other side of the coin, District utility providers told us that a warmer-than-usual autumn had damped their revenue growth. On the employment front, payrolls expanded at modest pace and wage growth was tepid. Prices at District service-providers were generally flat.

District manufacturers reported that activity picked up slightly during the first half of November, following a pullback in October. Contacts told us shipments and new orders expanded at a modest pace in recent weeks. Gains were particularly solid at electronics, machinery, paper and plastics firms. Producers attributed some of the recent increase in activity to a continued weakening of the dollar. An electronics producer in Maryland, for example, told us export orders rose "dramatically" in November. Despite the uptick in production, District factories trimmed payrolls over the past six weeks, while wages grew somewhat faster. Both raw material and finished good prices increased at a more measured pace since the end of September.

Demand for home mortgages generally continued to soften since our last report, though scattered reports of increased activity emerged in recent weeks. Lending activity slowed further in Charleston, S.C., and Raleigh, N.C., however, lenders in Washington D.C., and Richmond, Va., speculated that the pullback in demand might be "close to bottoming out." In addition, a contact in Greenville, S.C., noted that she was planning to add loan officers in anticipation of an uptick in business early next year. Furthermore, a lender in Charlottesville, Va., reported that he had seen lending activity pick up in the final two weeks of October. Interest rates on mortgages were steady, while lenders continued to scrutinize home loan applications closely. On the commercial side, reports on lending activity were mixed. Lenders in Charleston, W.Va., and Charlottesville, Va., reported a slight increase in activity, while contacts in the Carolinas said demand continued to wane. Commercial mortgage rates edged lower in most markets and credit standards remained taut.

Real Estate
Residential real estate conditions across the Fifth District eroded further since the end of September. Realtors said sales activity remained weak, and reports of home price reductions were more widespread. Inventories continued to swell. An agent on the eastern shore of Virginia described his local housing market as "very depressed," adding that sales in his area were down fifty percent from last year. Likewise, a Realtor in Fredericksburg, Va. noted a further slowdown in sales during October and early November. Reports were similar in the Washington, D.C. area where a contact described conditions as "dismal." An agent in Greensboro, N.C. told us the price and condition of properties had to be "just right in order to sell." Nonetheless, a Richmond, Va. contact said some homes priced well below market "just aren't selling." Given the prolonged malaise, Realtors told us they continue to advise clients to "stay put if you can." There were a few brighter spots, however. An agent in Odenton, Md. reported "decent" activity in recent weeks, and a contact in Greenville, S.C. told us October sales had been slightly above year-ago levels.

On the commercial real estate front, reports on District office markets were mixed, while assessments of retail and industrial leasing were generally upbeat. Contacts in Washington, D.C., Baltimore, Md. and the Carolinas noted slower office leasing activity in October and early November, though an agent in Raleigh, N.C., suggested that the "the recent slow down is only temporary." On the other hand, agents in Richmond, Va., Charleston, W.Va., and northern Virginia reported steady office leasing activity in recent weeks. Demand for retail space remained generally strong according to contacts in Virginia Beach, Va., and Columbia, S.C. Assessments of District industrial markets were mostly positive as well. A contact in Charleston, W.Va., said industrial leasing in his area was in "good shape," and a contact in Columbia, S.C., said his market was "the tightest it had been in ten years." Vacancy rates and rents for office and retail space were generally unchanged since our last report, while industrial vacancies firmed in several markets. Reports on new construction varied. New retail projects were reported in Richmond Va., Virginia Beach, Va., and Columbia, S.C., whereas a contact in Washington, D.C., said retail construction had slowed somewhat.

Reports on tourist activity were generally positive. Along the coast, contacts on the Outer Banks of North Carolina and in Virginia Beach, Va. told us bookings for the Veteran's Day weekend were somewhat stronger than a year ago. Another contact on the Outer Banks said tourism was "keeping the community afloat" as real estate and construction activity remained sluggish. Similarly, a manager at a ski resort in Virginia reported a drop off in sales of time shares, though he noted bookings were up and tourist spending was steady.

Temporary Employment
Fifth District temporary employment contacts reported generally strong demand for workers in recent weeks. Taut labor market conditions continued to fuel demand for temporary workers in Raleigh, N.C., and an agent in Bethesda, Md. reported notably firmer demand for office and retail workers. Prospects for future hiring activity remained somewhat cloudy, however. Agents in several markets expressed concern that soft holiday sales could lead to a fall off in retail hiring.

Drought conditions persisted and water restrictions remained in place in many areas of the Fifth District during October and early November. In South Carolina, a lack of soil moisture stalled oat and winter wheat plantings. Additionally, contacts expressed concern about the adequacy of winter feed supplies. There were a few pockets of improvement, however, as several areas of the District received light rainfall and experienced cooler temperatures in mid-November. As a result, pasture conditions improved in parts of Virginia, reducing the need for supplemental feeding. Moreover, the recent rainfall in sections of Maryland enabled farmers to make progress on small grain plantings and the harvesting of corn, cotton and soybeans.

Return to topReturn to top

Previous Cleveland Atlanta Next

Home | Monetary Policy | 2007 calendar
Accessibility | Contact Us
Last update: November 28, 2007