Federal Reserve Bank of Richmond

Summary of Economic Activity

The regional economy grew at a modest rate in recent weeks. Consumer spending on retail, restaurants, and leisure travel increased this period but new vehicle sales were down slightly. Import activity ramped up both from natural growth and from cargo that was diverted from Baltimore. Near the end of the reporting period, the Port of Baltimore was able to open a limited access channel, which would let most container ships traverse into the harbor. Residential real estate activity picked up in recent weeks, as did some commercial real estate leasing; however, very few new commercial construction projects were being started. Labor markets improved but labor supply remained tight. Price growth remained moderate, overall.

Labor Markets

Employment in the Fifth District grew at a moderate pace in the most recent reporting period. Labor availability was mixed. A chartered bus company remained constrained by a lack of quality candidates, but they noted greatly improved conditions and that they were getting close to "normal." A quick-service restaurant reported continued significant staffing challenges in their cafes. Many contacts cited the need for "quality" workers. A seasonal outdoor recreational company was not able to recruit some candidates because of a lack of affordable housing in the area. Firms continued to increase wages and offer bonuses to recruit and retain workers.


Price growth increased slightly in recent weeks, but growth remained at a moderate year-over-rate. According to our most recent surveys, the rate of growth in the prices received by service providers remained elevated at around 4 percent compared to around 2.5 percent for manufacturers. In both sectors, businesses reported that input and labor costs continued to rise, and in some cases, their input costs increased at a faster rate than the prices they received because customers were pushing back on additional price increases. Firms generally expected for growth in prices received to moderate over the next six months.


Fifth District manufacturing activity was unchanged in the most recent period. Several companies mentioned increased pressure on margins due to global competition. A precision metal fabricator reported all work had halted, and any new work must meet or beat international pricing. A dental implant manufacturer reported increased labor costs and competition from less expensive global competitors resulting in margin pressure. Future market uncertainty has created uneasiness for several contacts. A textile company's clients told them that they were not making big moves or long-term strategic decisions, which has affected the company's ability to plan for the rest of the year.

Ports and Transportation

Ports in Virginia and South Carolina reported moderate to strong (up to double-digit) increases in imports beyond the additional volume that they picked up from diverted Baltimore cargo. Exports of certain commodities like textiles and apparel were up, while exports of agricultural goods leveled or decreased. Freight rates decreased, but ocean carriers continued to add surcharges and fees for distance and hazards. The port of Baltimore opened a 45-foot limited access channel that will allow ninety percent of container vessels reentry to the port. Some container lines have waited for this depth clearance before loading new ships, and customers indicated an eagerness to return to Baltimore due to increased costs of getting cargo to the region from other ports.

Rail demand at inland ports was strong this period, continuing this year's record levels. Manufacturers in autos, auto parts, agriculture equipment and tools have favored rail due to lower carbon emissions and supply chain reliability. Trucking volume was up slightly, but spot rates continued to spiral downward due to oversaturation. Some firms noted that they picked up lost contracts because the service provider could not complete the routes as their operating costs exceeded their bid price.

Retail, Travel, and Tourism

Consumer spending on retail and travel increased moderately in recent weeks. Retail sales were up, but some retailers reported tighter profit margins due to rising input costs and an inability to pass along all of those costs to customers. On balance, spending on restaurants and leisure travel picked up and was largely driven by consumers with discretionary income. Conversely, low-to-moderate income consumers were reportedly pulling back on spending or trading down in the goods they purchased due to higher costs leading to tighter household budgets. New vehicle sales declined slightly this period.

Real Estate and Construction

Residential real estate activity picked up modestly in recent weeks. Total closed sales increased, and more homes came onto the market, which brought the total supply of homes for sale up slightly compared to prior months but remained below the pre-pandemic level of supply. Average sales prices rose modestly, and homes were selling at a slightly faster rate, particularly for low to mid-priced homes. An agent in South Carolina noted that home price escalation was pushing some potential buyers out of the market, but people moving to the area from higher-priced markets were unphased. New construction continued to expand in areas with population growth.

Commercial real estate activity increased slightly this period. Retail leasing activity picked up and vacancy rates remained low as new inventory was quickly absorbed. Office leasing increased slightly for class A space but declined for class B and C properties, which drove up vacancy rates in those buildings. Leasing and absorption in new multi-family buildings were strong. Construction of existing projects continued but developers from across regions and across sub-markets of commercial real estate noted that very few projects were being green lit as interest rates made it hard for deals to be financially viable amid continued high prices of material and labor.

Banking and Finance

Financial institutions reported that they continued to observe modest softening of loan demand over most loan types, but mainly in their commercial real estate and business loan portfolios. Higher interest rates were mainly noted as the primary driving force in this softening. Deposit levels continued to modestly decline with competition still high for any available balances. Some respondents noted that underwriting on new loan requests remained tight with most institutions decreasing their appetite for new loans. Loan delinquency rates remained stable, but one institution observed a slight decline in credit scores and credit quality for new consumer applicants.

Nonfinancial Services

Nonfinancial service providers continued to report that demand for their services as well as their revenues remained stable. A staffing firm noted that new orders for positions have started to increase from those in the first quarter, but finding qualified and willing-to-work applicants for these positions continued to be a challenge. Higher interest rates were still being noted as a limiting factor for new capital expenditures. Inflation and election year politics were also mentioned as factors impacting business expansion and overall confidence in the economy. Wages and workforce issues continued to be less of a challenge and to show modest stabilization.

For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.

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Last Update: May 29, 2024