Fed’s Fifth District economy expands slightly
Supply chain disruptions, backlogs easing
The economy in the Federal Reserve’s Fifth District (a multistate region including Virginia, North Carolina, South Carolina, West Virginia and Maryland) has expanded slightly since October, according to the latest edition of the Federal Reserve’s Beige Book, released Wednesday.
Published eight times per year, the Beige Book is based on anecdotal information about economic conditions gathered from the 12 Federal Reserve Banks. It is compiled from reports by bank and branch directors, as well as information gathered from business contacts, economists, market experts and other sources.
Here’s what the Nov. 30 Beige Book edition revealed about the direction the economy is taking:
Manufacturing activity in the Fifth District slowed mildly as new orders and backlogs declined but shipments stayed flat. Vendor lead times declined, indicating supply chain backlogs were easing.
Travel and tourism increased moderately, and air travel is expected to increase over the holidays. Retail spending increased modestly from October’s report. Residential and commercial real estate market activity slowed.
Respondents in the ports and transportation sector indicated that volumes were beginning to decline, with overall loaded freight shipments down at Fifth District ports. Loaded exports continued down while import volumes were flat or up slightly, led by furniture, sporting goods and heavy equipment.
Dwell times at the ports declined, reducing congestion and lowering storage fees. Spot rates from Asia to East Coast ports decreased 33% from last period but remained above the pre-pandemic rates, according to the Fed.
Trucking firms reported a slight decrease in freight volumes, in line with the normal seasonal slowdown. Industrial customers’ demand remained strong while retail volumes declined. Trucking respondents reported that they weren’t hiring drivers because their existing workforce could manage current volumes.
The cost of new equipment increased substantially, firms reported, and new truck tractors and trailers were still backordered by about a year.
Employment in the Fifth District increased modestly, and many firms reported unfilled positions. The majority said they were increasing wages for new and existing staff by more than they had in previous years. Companies reported difficulty finding skilled workers.
Prices grew robustly, with manufacturers and service sector companies reporting strong year-over-year price growth in both input and customer prices.
Retailers reported modest sales and revenue growth and increasing inventory. Used vehicle sales increased moderately as prices began to drop, but new vehicle sales stayed low due to low inventory levels, rising prices and higher borrowing costs.
Housing demand slowed as buyer traffic and listings declined. Days on the market and inventory increased but remained below normal levels. High interest rates and low inventory led to fewer pending and closed sales, according to respondents. Prices stayed consistent, but sellers reported offering concessions such as temporary rate buydowns or paying closing costs.
New home construction slowed and builders stopped buying new lots because of high building costs and economic uncertainty. New commercial real estate projects slowed due to rising interest rates and higher construction costs, as well as supply chain disruptions and labor shortages.
In the commercial real estate market, the retail, office and industrial sectors had higher vacancy rates this period, although Class A office space activity remained strong as companies sought to entice employees to return to the office.
Demand for commercial and residential loans decreased moderately in the face of rising interest rates. Higher input costs also weakened commercial loan demand. Deposit growth slowed as customers searched elsewhere for higher yields.