Region's economy gloomy, Fed reports

January 24, 1991|By Stacey Evers | Stacey Evers,States News Service

WASHINGTON -- Dark skies and gloomy prospects continued to dominate the economy of the nation and the Middle Atlantic region in December and early January, according to a report by the Federal Reserve Board.

Across the five-state region, production fell, retail sales were disappointing and builders were idle, says the report released yesterday.

State governments, struggling with budget shortfalls, haven't been able to rely on travelers because of a decline in tourism.

The district includes Maryland, Virginia, West Virginia, North Carolina and South Carolina and Washington, D.C.

J. Randall Evans, secretary for the Maryland Department of Employment and Economic Development, agreed that the state's economy is struggling, but said he believes the recession will be a short one.

Evans pointed out that inventories and inflation are lower than they were during previous recessions and the dollar is stronger. And despite concerns over the Persian Gulf War, people are proud about the performance of the U.S. troops and weapons.

"I think there's a beginning of a rebound," he said.

State governments attributed revenue shortfalls to deteriorating economies caused in part by additional financial burdens from the federal government and "overly ambitious" federal spending mandates.

Other contributors to the state governments' economic struggles are the Persian Gulf crisis and skyrocketing health insurance costs, the state governments said.

The Middle East situation also is clouding the future of manufacturing, with some states reporting that industry revival depends on a resolution to the conflict, the Federal Reserve said.

The economic analysis may be somewhat skewed for Maryland because of the region's sprawl, which includes conditions and industries, such as textiles, that do not affect the state.

Regional manufacturers reported that their deflated industry reflects a national trend, with only one-third of the manufacturers surveyed predicting increased profits in 1991.

A boost in raw material prices combined with poor sales slowed manufacturing in December. To cope, firms cut back production, employment and the length of work weeks.

Ports in Baltimore, Charleston, S.C., and Hampton Roads, Va., reported that exports rose while changes in import volume were mixed.

Christmas sales didn't relieve retail merchants, with the majority of respondents to the Fed's mail survey indicating lower sales than a year earlier.

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