The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed November 29, 2006

Federal Reserve Districts

Fifth District--Richmond

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Economic activity in the Fifth District expanded at a somewhat stronger pace from late October through mid November, despite continued sluggishness in housing markets. Revenues at services firms grew slightly faster, aided by firmer demand at health care organizations and government contractors. Retail sales grew briskly, despite sluggishness in most big-ticket categories. Manufacturing reversed its October dip, posting increased shipments and orders in recent weeks. Commercial leasing remained strong, while housing activity continued to weaken somewhat, with softer prices more in evidence. Mortgage lenders, however, noted some firming in loan demand following several months of weakening activity. Tourism was healthy, with most areas reporting gains in recent weeks. Labor markets tightened further, with some reports of higher wages and shortages of skilled workers. Price pressures were mixed, moderating in retail and services, but ramping up in manufacturing. Mild temperatures and ample rainfall helped small grains, but limited fieldwork opportunities for District farmers.

Contacts reported that retail sales grew at a substantially faster pace in early November, although weakness remained in most big-ticket categories. Chain department stores and grocery stores noted stronger sales, and big box retailers said electronics sales were especially robust. In addition, a contact at a large hardware store in central Virginia said sales growth had picked up, even with significant price increases on "anything made with steel or petroleum." In contrast, sales slowed at home improvement and building supply stores as housing activity remained sluggish. The pace of automobile and light truck sales was generally unchanged from a month ago, though a few dealers said their sales declined in recent weeks. Retailers were upbeat but somewhat guarded about holiday sales this year; some looked for holiday sales to increase about 4% compared to last year. Although a few District automobile dealers and furniture stores reduced staff, hiring picked up at most retail businesses. Wages grew more quickly at retail establishments, while price growth slowed.

District services firms indicated that their revenues grew slightly faster since our last report. Customer demand strengthened at healthcare organizations and utilities, and federal government contractors said that business had picked up with the new federal fiscal-year budget. Additionally, a financial services consultant in Virginia characterized demand as steady, and he noted improving client attitudes regarding the economy. Contacts at services firms said the pace of hiring moderated this month. Wage and price growth also slowed.

Activity in the manufacturing sector picked up during the first half of November following a contraction in October. Contacts told us that factory shipments, new orders and employment expanded at a solid pace in recent weeks. Activity was particularly strong at chemicals, food, industrial machinery and transportation equipment firms; a turbine producer in South Carolina, for example, said that the oil industry was driving his business. He indicated that they had received three large turbine contracts for Saudi Arabia. A plastics producer was also upbeat, noting, "November was a good month; we've had a flurry of new orders and our backlogs are strong." In contrast, a furniture manufacturer in North Carolina reported that sales had reached their lowest level since the post September 11, 2001 period. Prices for both raw materials and finished goods picked up considerably in November after rising moderately in October.

District bankers reported that loan demand steadied since our last report. Residential mortgage lending remained weak, but some increased demand in the new homes sector helped to stabilize loan volume. Some contacts said that builders were slashing prices which "caused more people to get in on the action." A number of mortgage lenders reported that loan standards had tightened. A Charleston, S.C., banker noted that his bank was more carefully scrutinizing "the type of properties receiving loans, but not applicants." The demand for commercial loans held firm in October and November. Little change was reported in interest rates or the rates of delinquent loans.

Real Estate
Residential real estate agents across the District reported continued weakness in home sales. A Washington, D.C., agent told us that sales were down 17 percent from a year earlier, and he predicted that this trend would persist for another two years. In Richmond, Va., home sales were also reported to have fallen below 2005 levels. An agent there told us that buyers were not rushing to make purchasing decisions--they could afford to "pick and choose." Home inventories continued to rise modestly and some sellers were trimming asking prices. In contrast, a contact in Greenville, S.C., reported "positive sales" which he attributed mostly to large companies locating there recently. Several contacts noted modest decreases in home prices.

Commercial real estate agents across the District reported that leasing activity remained healthy in recent weeks. In the Raleigh market, a contact said industrial activity was "on fire," driven by strong population growth in the area. Contacts generally reported that vacancy rates edged down since our last report and several noted a slight uptick in rental rates.

Tourist activity was generally stronger since our last report. A contact on North Carolina's Outer Banks said hotels and resorts were booked solid for the Veteran's Day weekend. She attributed the increase primarily to their first marathon which attracted 4,400 runners. In addition, a manager at a mountain resort in western Virginia noted record-breaking time-share sales--up nearly 20 percent over last year. In contrast, a hotelier at Virginia Beach reported that some corporate clients had scaled down their budgets--resulting in less money being spent on food and beverages.

Temporary Employment
Temporary employment agencies in the District continued to report generally firmer demand for workers since our last report. In some areas, tight labor markets had made it difficult for companies to fill needed positions. Workers with sales, life sciences, engineering and financial skills remained in strong demand.

Mild, rainy weather conditions assisted small grain development in most areas of the District, but rains delayed field work in some regions. Analysts in Virginia and Maryland told us that soggy field conditions hindered soybean harvests. They noted, however, that higher grain prices in recent weeks encouraged farmers to continue small grain plantings when the weather permitted. In South Carolina, harvesting of sweet potatoes and apples was ahead of schedule, while corn and soybean harvests fell behind schedule in West Virginia. Harvests of cotton, peanuts, sweet potatoes, sorghum and soybeans were nearing completion in North Carolina, and Christmas tree producers in that state said they were preparing for the holiday season.

Return to topReturn to top

Previous Cleveland Atlanta Next

Home | Monetary Policy | 2006 calendar
Accessibility | Contact Us
Last update: November 29, 2006