January 20, 1984
Retailers in the First District enjoyed a very successful Christmas season. Hard goods, especially electronics, sold particularly well. Inventories are satisfactory. Plans for 1984 are optimistic. Manufacturers are also very confident that 1984 will be a good year, but they are apprehensive about 1985. Capital spending is picking up but the emphasis is on productivity enhancement rather than expansion. Exports remain very weak. Price increases seem to be more frequent, but firms are still very caution about raising prices. Mortgage lending by thrift institutions declined in the fourth quarter. Commitment rates for fixed-rate mortgages have been edging lower.
Retail
Retailers in the First District report very strong sales gains in
December. They are optimistic about 1984. Hard goods in general and
electronics in particular highlighted a highly successful Christmas
shopping season. Local merchants again commented on the Northeast's
strength compared to associated stores in other regions.
For two of the firms contacted sales in December were more than 20 percent above sales in comparable stores in December a year ago. (Most newspaper reports of sales growth are not on a comparable stores basis.) Departments performing very well included video cassette recorders, tapes and records, computers, microwave ovens, TVs and other appliance hardware, physical fitness product., and women's coats. A store selling mostly apparel and other soft goods attributed "good but not outstanding results to a lack of consumer hard goods.
All those contacted have optimistic plans for 1984, with one firs's optimism bolstered by 24 percent sales growth to date in January. Inventory levels are satisfactory. Merchants attribute consumer enthusiasm to steady prices (and even declining prices tar some computer and electronics items) as well as to the general recovery.
Manufacturing
First District manufacturers are confident that 1984 will be a good
year, but they are apprehensive about 198t Everyone contacted has
seen an upturn in business, with several reporting that their most
recent quarter was "excellent." While order and shipment increases
have been widespread, sales of automotive products—both original
equipment and after-market—have been particularly robust. Demand
has also improved markedly for smaller-scale, productivity-enhancing
capital goods. Still languishing are very large, capacity-expanding
capital goods and projects. Use respondent noted trust the only
markets today for increased capacity in such basic industries as
autos, steel and energy are overseas; and these overseas markets are
drying tap because of the strong dollar. Exports of all kinds are
the other major area which remains very weak. In contrast to
exports, sales of overseas subsidiaries seem to be picking up a
little.
The capital spending plans of First District manufacturers are consistent with the pattern they observe in their own sales. A number are increasing capital spending, but the emphasis is on productivity improvement. Two respondents are adding to capacity, but most have no plans to expand and several are consolidating their operations in fewer plants.
Employment levels are rising for most firms, although one respondent foresees a large layoff in one division. Several manufacturers noted that they are producing more output with fewer people than in the past.
Price increases seem to be more frequent. Most firms say they see more increases in the prices of purchased materials and components. Paper, steel and aluminum were mentioned. Several of the firms contacted have recently increased their own prices. Nevertheless, manufacturers are still very cautious about raising prices and will back off if the increase meets a lot of resistance. According to an automotive supplier, the auto companies are negotiating long-term contracts with price decreases in the first year and very modest increases thereafter. One respondent expressed concern that the wage settlement to be negotiated between GM and the UAW in 1984 will be very large and will set a pattern for other industries.
Mortgage Lending
Mortgage lending by thrift institutions declined in the fourth
quarter but remained far above the level in the fourth quarter of
1982. Loan repayments appear to have exceeded loans made in the
fourth quarter, but for the entire year loans were ahead of
repayments. Mortgage rates have declined slightly from the highs of
late summer.