|
The overall pace of Fifth District economic activity picked up in August, although growth in some sectors moderated since our last report. Manufacturing expanded more rapidly than in the June-July period, but retail and services growth slowed somewhat. Banks reported that lending activity rose modestly and that demand remained strong for commercial loans and residential mortgages. In real estate, commercial leasing activity increased further while residential activity remained mixed. Labor markets continued to be tight and wage pressures were more noticeable, especially for skilled workers. Price pressures were little changed. In agriculture, crop yield prospects diminished because of continued dry weather.
Retail
Retail activity in the Fifth District expanded at a more moderate rate in August following July's exceptional pace. Revenues increased but lacked the strong growth last reported. Retail wages again increased sharply. Retailers added fewer employees; several contacts reported increased difficulty in finding and retaining workers. One South Carolina merchant said that employee turnover had become "severe" and finding people willing to work "retailers' hours" was nearly impossible. Shopper traffic showed continued strength. However, contacts reported a rise in retail inventories and a fall in sales of big-ticket items. Some sources described increased price discounts on furniture and apparel, but otherwise prices were stable.
Services
Service-sector activity remained strong during August although revenue growth eased slightly. Employment and wages rose at a steady rate despite contacts'
reports that workers were in critically short supply. Looking forward, sources were optimistic, expecting stronger demand for their services during the next six months.
Manufacturing
The pace of District manufacturing activity quickened in recent weeks as growth in shipments and new orders strengthened across most industries. Manufacturers of electronic components, furniture, paper products, and textiles said that their shipments strengthened. However, producers of chemicals, plastics, primary metals, and transportation equipment reported that their shipments weakened. A medical products company noted that its new orders fell, possibly because customers feared product spoilage because of the UPS strike. Employment and wage growth in the manufacturing sector picked up in August; however, contacts continued to express concern over the availability of qualified labor. Manufacturers again stated that raw materials costs increased at a faster rate than their finished goods prices.
Tourism
Tourist activity continued to strengthen since the last Beige Book. Contacts reported that despite a "flat" Labor Day weekend the number of tourists visiting Fifth District resorts in August increased relative to both the previous month and a year earlier.
Ports
Port activity picked up in July with contacts reporting faster growth for both import and export volumes. The share of containerized cargo shipped through District ports increased somewhat while that of break-bulk cargo edged slightly lower. Strong growth was again reported in paper product shipments, but slower growth was noted in agricultural commodity shipments.
Temporary Employment
Temporary employment agencies continued to report increased demand for labor. Most agency contacts said that finding workers for clients had become more difficult and that the scarcity of computer-skilled workers was particularly pronounced. Several agencies reported that they pay cash "bounties" to temporary workers who help them recruit others. While wage rates continued to rise only modestly in many areas of the District, agents in cities with low unemployment rates noted an acceleration in wages. One North Carolina agent said that companies in her area unwilling to raise wages were being told they had little chance of filling open positions; she believed that these firms were "beginning to see the light."
Finance
Lending activity in the Fifth District edged higher in August. Demand for residential mortgages and commercial loans was generally strong, and contacts continued to report keen competition for commercial accounts. Consumer loan activity remained spotty, except for a pickup in the demand for education loans. Interest rates on loans were little changed.
Residential Real Estate
Across the District, residential real estate activity was mixed. Realtors noted that customer traffic and home sales increased in August, while contractors indicated that building permits and housing starts were flat. Sales of higher-priced homes were strong in many areas of the District. Looking forward, sources expected to see further strength in sales of higher-priced homes because of recent tax law changes.
Commercial Real Estate
Since the last Beige Book, commercial real estate activity continued to expand at a moderate rate. Leasing activity across the District ranged from stable to somewhat higher; one contact echoed the sentiments of many when he stated that "there have been no big jumps, either up or down." Vacancy and rental rates generally were described as holding steady, although contacts noted rising rents in North Carolina markets. Contacts in several areas indicated that lease terms included fewer "giveaways." Most sources noted a further increase in construction activity, but saw little speculative building apart from Class A office space. One central Virginia realtor believed that retail space in that area was becoming overbuilt.
Agriculture
Conditions in agriculture deteriorated somewhat during the last several weeks according to analysts in that sector. Continued dry weather reduced hay production and prospective corn yields, although the impact on other crops was said to be less noticeable, and prospects for irrigated crops such as vegetables and tobacco remained favorable. In livestock, poultry production remained on the upswing despite a disease outbreak that reduced turkey output in North Carolina. Also in North Carolina, the state legislature recently enacted a two-year moratorium on new hog operations. However, industry watchers believed that swine production would likely continue to expand there because a number of hog operations were in the start-up phase prior to the passage of the legislation and were not subject to the new law.
|
Cleveland