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Economic activity in the Fifth District slowed mildly this cycle, reversing from a slight increase reported last period. Consumer spending on retail goods, vehicles, and tourism declined in recent weeks. Manufacturing activity contracted slightly as well. Residential real estate activity softened alongside mortgage loan demand; however, banks noted an increase in demand for home equity lines of credit. Commercial real estate activity picked up slightly amid an increase in demand for retail leasing and continued strength in industrial construction. Port activity picked up moderately while trucking demand remained flat. Employment increased slightly in recent weeks and several contacts said that they were not looking to make changes to headcounts at this time. Price growth slowed slightly but remained elevated on a year-over-year basis.
Employment in the Fifth District increased slightly in the most recent period. Several contacts reported satisfaction with current headcounts and were only backfilling for necessary positions. Other contacts were allowing headcounts to decline mainly through attrition. A software company did not expect to increase headcounts due to adequate staffing levels that could handle increases in demand. Finding skilled workers continued to be a challenge. A construction company reported plenty of work but not enough staff despite advertising for open positions. Some businesses reported positive changes in skilled-worker availability. A brewer increased wages in their production department and attracted higher-skilled workers while decreasing turnover. A stone cutter reported more interest in learning trades due to investments at the local community college. Worker wage expectations continued to be higher than what firms wanted to offer.
Price growth slowed somewhat this cycle but year-over-year growth in prices remained elevated, particularly for services. According to our most recent surveys, annual growth in prices received for services stayed elevated; price growth has generally remained between three and a half and four percent so far this year. Meanwhile, year-over-year growth in prices received by surveyed manufacturers edged lower, falling below two percent in the most recent reading.
Fifth District manufacturing activity declined slightly in the most recent period. Several contacts mentioned softening conditions. A manufacturer that supplies the hospitality industry reported a decline in equipment sales due to their equipment being used less and not needing replacement anymore. A millwork manufacturer reported that persistently high inflation has caused customers not "upgrade their lifestyles," resulting in order declines. Several contacts reported optimism about future demand; for example, a North Carolina machines manufacturer expects increased business due to new customers moving into the area.
Ports in the Fifth District reported moderate increases up to 7 percent in containerized cargo volumes due to peak season retail activity; contacts expect this trend to continue into the third quarter before flattening later this year.
Increased capacity in ocean shipping has normalized air cargo volumes with heavy materials like rubber moving back to sea and road freight.
Reductions in air freight movement led one Fifth District airport downsizing its cargo workforce by almost fifty percent.
Container prices have rapidly increased with spot rates four times higher than they were last October.
In trucking segment demand was steady at an unseasonably low level of volume Contacts cited high interest rates upcoming election causes uncertainty contributing suppressed demand Pricing held steady firms negotiated contract increases downward price pressure was reported road freight Trucking firms reported downward drift driver headcount through year vacant positions were not filled
Consumer spending softened slightly recent weeks majority retailers mild decline both sales shopper traffic hardware store average ticket sales per customer down fewer big-ticket purchases such grills power tools being made fast-casual restaurant chain focusing launching new value offerings hopes boost sales coming months Light vehicle motorcycle sales modestly some contacts attributed elevated interest rates making cost financing more expensive Consumer spending travel tourism also contracted slightly Hotels coastal regions North South Carolina decline room nights sold decline high level previous months
Residential real estate activity showed slight decrease buyer traffic flattening sales agents said better expected time year Additionally home listings new home construction beginning decrease slightly According agent Virginia those thinking listing struggling losing lower mortgage rates Agents brought National Association Realtors (NAR) policy changes mixed perspectives potential impacts residential real estate some concerned buyers ability afford finance agent's commission
Commercial real estate activity continued increase slightly recent weeks Retail leasing picked but sales remained flat New construction continued pad sites gas stations fast food repurposing vacant retail buildings Office space continued see rightsizing more investments going towards luxurious aesthetics create "country club feel" one Virginia agent noted Industrial remained strong some projects limited power site availability Commercial investors increasingly struggling loans maturing declining replacement rates potential new buyers sitting sidelines
Financial institutions softening loan demand primarily commercial real estate business loan portfolios However lenders continued see modest increases demand home equity lines credit Some lenders started report slight increase mortgage loan refinancing activity brought downward movement rates Institutions seeing stabilization deposit levels competition remained strong marketplace new balances Some lenders noted started see decline credit quality borrowers delinquencies remained stable
Nonfinancial services providers continued report demand services revenues remained stable executive search firm increase unemployed tech professionals softened need firm's services clients finding easier fill positions own few firms noted clients felt hesitant because international conflicts uncertainty within economy upcoming election therefore delaying investments Another respondent less discretionary spending customers consumers seemed nervous about economy
For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.
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