Skip to main content

Richmond: November 2019

‹ Back to Archive Search

Beige Book Report: Richmond

November 27, 2019

Summary of Economic Activity
The Fifth District economy grew moderately since our previous Beige Book. A majority of manufacturers reported growth in shipments and new orders, although tariffs and trade uncertainty were concerns for many producers. Overall, import volumes continued to exceed export volumes; however, growth in exports outpaced growth in imports in recent weeks. Meanwhile, trucking companies reported a decline in rates as demand softened to a moderate rate. Some retailers reported strong sales, although some high end retailers lost sales to customers who sought less expensive alternatives. Travel and tourism strengthened across most of the Fifth District. Home sales and mortgage lending picked up in recent weeks, according to real estate agents and lenders. On the commercial side, real estate leasing, sales, and construction grew at a modest to moderate pace with the exception of retail leasing, which slowed in several markets. Nonfinancial services firms reported mild growth, overall, and expected slow growth to continue heading into 2020. Executives noted a slowdown in the oil and gas industry. Farmers have been hesitant to invest in land or equipment. Labor demand strengthened while wage increases were moderate, overall. Price growth also remained moderate in recent weeks.

Employment and Wages
The demand for labor strengthened moderately in recent weeks. Employment agencies reported a seasonal pick-up in new job openings and an increase in direct hire recruitment services, rather than temporary, for larger clients. Employers continued to report difficulties finding qualified workers. A few firms sought to fill job openings with in-house training programs, apprenticeship programs, or partnerships with educational institutions. Wages increased moderately, overall. Meanwhile, staffing agencies reported increased wage pressures for jobs in the lower pay scales.

Price growth remained moderate since our previous report. According to manufacturing and service sector firms, growth of prices paid continued to exceed growth in prices received. Rising labor costs, including wages and employer-paid health insurance, were noted as contributors to the increase in prices paid. Meanwhile, raw materials prices were reportedly up for some construction materials and tariffed goods while price declines were cited for freight transportation, energy, food commodities, chemicals, and steel.

Manufacturing in the Fifth District grew moderately since our last report. Contacts reported increases in shipments and new orders, overall, as strong demand supported continued growth for many manufacturers. However, tariffs and trade continued to be concerns since tariffs led to higher costs of raw materials and lower profit margins. Trade-related uncertainty remained significant. Lower profitability caused some companies to decrease production levels and staff headcounts. Meanwhile, some manufacturers struggled on the demand side, such as a Virginia yarn manufacturer, who reported that economic uncertainty is hurting demand by leading some customers to reduce inventory levels.

Ports and Transportation
Ports in the Fifth District saw modest growth, overall. Import volumes continued to exceed export volumes, but several contacts noted that export volumes were growing faster than import volumes. On the export side, growth was particularly strong in chemicals, plastics, and meat. However, some ports saw softness in autos, on both the import and export side. Firms continued to express concerns about trade with China but were able to divert some trade through other East Asian countries. Meanwhile, an airport executive saw a drop in cargo to and from Europe and looked to expand business in other parts of the world.

Fifth District trucking companies reported moderate demand in recent weeks. Executives saw steady business with established customers but softening rates, lower revenues, and less demand than a year ago. Some small trucking companies that had opened to meet high demand in recent years went out of business, easing pressures on driver availability and wages. Executives differed in their views about the future. For example, a North Carolina trucking firm planned to expand its fleet of tractors and drivers in 2020, but another company stopped filling open positions because of low revenues and high costs.

Retail, Travel, and Tourism
Travel and tourism in the Fifth District were generally strong in recent weeks. Hotels and resorts had higher occupancy and moderate rate increases. Restaurants around the Fifth District also had steady demand, although some had to cut services or hours because of difficulty finding employees. In Charleston, South Carolina, tourism recovered well after Hurricane Dorian, but attractions in the District of Columbia noted some softness. Contacts noted that low gas prices gave people incentive to travel but expressed concerns that ongoing delays in operationalizing new aircraft could hamper growth.

Fifth District retailers experienced varied conditions since our last report. Some reported strong sales, and one even planned to expand by opening new stores. However, hardware stores saw softening demand, as did high-end clothing stores, who attributed weakness to customers looking for cheaper alternatives. Several retailers reported that tariffs were raising costs and hurting profit margins. In Virginia, a home goods store discontinued several items, particularly small electronic devices, as a result of tariff-related cost increases.

Real Estate and Construction
Home sales increased moderately in recent weeks. Real estate agents indicated that inventories of single-family homes were little changed as new listings continued to sell quickly and buyer traffic was steady at open houses and showings. Meanwhile, new home sales and construction were steady, although construction of lower priced homes remained limited. Overall, agents reported modest growth in home prices.

Commercial real estate leasing rose moderately in recent weeks. Brokers continued to reported strong demand for industrial space and office leasing increased modestly in some markets. Retail leasing, however, slowed across markets and vacancy rates increased slightly. Meanwhile, rental rates were reportedly stable to increasing modestly. Commercial sales and construction increased modestly in some regions. Multifamily leasing remained healthy in most markets, while multifamily construction remained steady.

Banking and Finance
On the whole, loan demand picked up modestly since our previous report. Residential mortgage demand was generally described as stable to increasing modestly. Some banks noted that low interest rates helped to increase loan demand, but net interest margins were compressed. Bankers also noted an increase in mortgage refinancing. Commercial real estate loan demand and business lending strengthened modestly while automotive lending was flat, on balance. Deposits grew moderately since our last report. Bankers continued to report vigorous competition for loans and deposits. Measures of credit quality remained stable at high levels throughout the Fifth District.

Nonfinancial Services
On balance, nonfinancial services firms reported slight growth in demand in recent weeks. Hospitals and health care providers continued to experience solid growth. A records management firm, on the other hand, saw softer federal government spending in recent weeks. Advertising and marketing firms were generally positive, although one marketing executive believed that the outlook in his industry had shifted from optimistic to cautiously optimistic or "a little nervous". Several firms indicated that challenges finding qualified workers and general economic uncertainty were constraining growth and leading to expectations for slower growth heading into 2020.

Natural Resources
Comments on the natural resources sector were somewhat pessimistic. One contact noted a slowdown in oil and gas drilling and was concerned about bankruptcies in the coal industry. Meanwhile, farmers were reportedly hesitant to invest in land or equipment because of unstable commodity prices, limited labor availability, tariffs, and their income being tied to government subsidies such as disaster and trade relief funds.

For more information about District economic conditions visit: