The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed July 28, 2010

Federal Reserve Districts

Fifth District--Richmond

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

District economic activity was generally described as either mixed or modestly improving since our last report. While manufacturing remained a bright spot, the pace of activity reported in our last assessment appears to have eased somewhat--particularly among firms supplying the housing sector. Port authorities reported a pick-up in activity, led by recent increases in import volumes. Bank lending to businesses improved moderately, while home mortgage lending varied widely around the District. Tourism also strengthened. In addition, local labor markets posted modest gains, with temp agencies reporting gains especially from the manufacturing sector. On a weaker note, residential real estate agents and contacts at other services firms described activity as mixed. Finally, commercial real estate agents and retailers reported generally softer market conditions, but both sectors cited at least some pockets of improvement.

Retail sales weakened since our last report. Several auto dealers reported that light vehicle sales dropped, and a North Carolina medical devices supplier said payers were trying to negotiate lower reimbursement rates on durable medical equipment. In addition, a contact at a large home and garden chain reported that impulse buying fell, and that home remodeling purchases had scaled back dramatically as consumers "splurged small." Overall, according to our District survey, big-ticket purchases and shopper traffic plummeted. Many District retailers indicated that inventories continued to decline in recent weeks. Merchants increasingly cut jobs, and retail prices advanced only slightly faster since our last report.

Contacts and survey respondents at non-retail services firms reported mixed activity during the past four weeks. For example, several businesses indicated that their revenues had contracted, while others reported an uptick, with the caveat that they are not seeing significant strengthening in their markets. Several contacts at professional, scientific, and technical firms said their businesses experienced increased demand for services since our last report, while a financial advisor at an investment services firm said conditions were "stable." Several healthcare-related businesses cited little change in demand in recent weeks, but a West Virginia nursing home administrator said the economy and healthcare reform put downward pressure on his business. Many respondents to our service sector survey reported that price increases slowed at services firms.

District manufacturing continued to expand in June and early July, albeit at a slower pace than a few months ago. Most of our District survey respondents reported that growth in their shipments and new orders had moderated, while several contacts noted that their employment edged higher. A parts supplier reported a significant increase in demand from auto manufacturers, with business being well ahead of expectations. In addition, a tire producer informed us that his customers had depleted their inventories, which caused him to expect an increase in orders soon. Moreover, a contact at a textile plant commented that his company had built inventory in anticipation of continued price increases for synthetic fibers. He noted, however, that his customers continued to maintain low inventory levels, with current sales higher than replenishment rates. In contrast, a furniture manufacturer noted that his company had reduced its workforce by half due to weak conditions in the housing market. Similarly, a manufacturer of exterior doors for residential housing indicated that the previous uptick in demand for building products had now vanished.

Port activity in the District picked up since our last report. One contact stated that total shipping volume at his port was back to pre-recession levels. While exports had been improving over much of this year, he noted that imports were now increasing as well. A contact that handles a variety of roll-on cargo stated that about two-thirds of the recent gains in port activity were being driven by imports. At least some of the import gains were attributed to inventory restocking. Several port officials noted that shipping lines were attempting to raise rates.

Banking activity over the last six to eight weeks improved modestly, but gains were uneven. For example, several bankers noted an increase in commercial lending, although one lender stated that commercial lending had weakened. Contacts noted that increased lending went to support high-tech and export activity, as well as auto dealer inventory. An increase in merger and acquisition activity was also noted by several sources. One banker reported a marginal improvement in small business lending, while an analyst for a large bank reported a retrenchment in consumer borrowing. A small community banker stated that the bank's own auto loans had edged down as other banks returned to the market, increasing loan competition. Reports on home mortgage lending varied, with some bankers reporting improvements and others still experiencing declines. A loan officer at a community bank stated that refinancing was a significant portion of his mortgage lending activity in recent weeks. Most contacts stated that credit quality was slowly improving from a weak base, although one source noted that delinquencies on both residential and commercial loans were still "off the charts."

Real Estate
Reports from residential Realtors varied across the Fifth District. Several contacts reported that home sales slowed since the expiration of the federal government's tax credit program. However, other contacts indicated that sales in the upper-middle price bracket were still moving, at least in some areas of the District, while one agent noted that single-family homes in suburban neighborhoods were experiencing the most activity. Another agent reported that houses priced below $150K remained the best sellers, due to more foreclosure-related and short sales. A Realtor in Richmond reported that the metropolitan market in recent weeks did not meet the company's expectations in July. An agent for a major realty chain noted that the average number of days on the market for most homes remained high.

Commercial real estate markets continued to weaken since our last report, with at least one contact not expecting improvements until well into the future. According to one contact in North Carolina, vacancy rates in most metro areas remained relatively high and were still rising in some areas. Vacancy rates were particularly high in the retail sector in both Richmond and Baltimore, according to several agents. Retail and office leasing activity was reported to be improving in Columbia, S.C., as well as in parts of North Carolina. Commercial rental rates in parts of North Carolina were being driven down by property owners' fears that things could get worse, and an agent stated that retail rental rates remained negotiable in Richmond. One contact stated that new construction financing was "not going at all."

Tourist activity increased since our last report. Along the coast, contacts reported that bookings over the July 4th holiday weekend were much stronger than a year ago. A hotelier from Virginia Beach noted that his hotel was filled to capacity, even though room rates had jumped dramatically. A contact in Myrtle Beach said that visitation was up 10 to 12 percent in recent weeks compared to a year ago, but consumer spending was still below pre-recession levels. He attributed some of the increase in visits and spending to tourists changing vacation plans from the Gulf to the eastern seaboard. Moreover, an analyst from the Outer Banks of North Carolina indicated that restaurants were full and sales at gift shops were flourishing. Managers at mountain resorts reported that holiday reservations were the best in years and that time shares were rented for most of the summer. They noted, however, that although tourists were spending slightly less on food, they were spending considerably more on recreational activities and merchandise.

Labor Markets
Labor market activity picked up slightly in recent weeks, according to most contacts. Several firms reported adding jobs for at least a third straight month. A services firm increased its hiring due to rising demand, but several retailers reported job cuts. Temporary employment agents reported slow, but steady increases in hiring by small or mid-sized businesses--especially in manufacturing. For example, a contact at an automotive plant told us that temporary employment workers had been hired to help with the increase in production. One temp agent noted an increase in the number of employees being hired on a permanent basis by his clients. Increased demand for temporary workers was reported for a diverse set of industries, including warehouse and distribution centers, manufacturing plants, and pharmaceutical firms. Most respondents to our manufacturing and service sector surveys indicated that wages were little changed since our last report.

Return to topReturn to top

Previous Cleveland Atlanta Next

Home | Monetary Policy | 2010 calendar
Accessibility | Contact Us
Last update: July 28, 2010