Although recent merchants' sales have generally met expectations, retailers are planning inventories conservatively for the coming holiday season. Residential building activity and sales weakened and are expected to continue to slow through year-end. Commercial real estate markets remain healthy, and there is little apparent risk of widespread overbuilding at this time. A few large projects are stimulating an otherwise sluggish manufacturing sector. The outlook for the tourism and hospitality industry is less positive than before, but still healthy.
Bankers report solid overall lending growth.
Tight labor markets and labor quality remain significant problems for many District employers. Few manufacturing and retail firms say they have been able to pass on higher labor and fuel costs to their customers, resulting in increased pressure on profitability. The District's agricultural sector has been severely affected by the drought. Most merchants said that sales results during September and early October had generally met their expectations, and this contrasts with our last report that sales in August had fallen below expectations. Retailers reported mostly balanced inventories but are planning conservatively for the coming holiday season.