September 16, 1984
Overview
Generally, Fifth District economic conditions have changed little in
recent weeks. The expansion is continuing, but at a somewhat slower
rate. Individual sectors are showing more variability from month to
month, and inventory building seems to have run its course. The past
month, for instance, drew strength from housing and construction,
sales of consumer durables, and coal production. The manufacturing
sector was essentially flat as imports continued to eat into sales
of such goods as textiles, apparel, furniture, and lumber products.
At the same time, however, manufacturers supplying the automobile
industry continue to operate at near capacity, as does the paper
producing sector. Despite the continued strength of imports, a lack
of inventory accumulation, and the possibility of nationwide strikes
that would significantly affect the District, the outlook among
District businessmen remains generally positive.
Manufacturing
District manufacturing activity showed little change in August, but
with the sizeable gains of July, the overall level is quite high.
Consumer durables and capital and industrial goods continue as
leaders, showing uniform strength and near capacity production. The
building materials sector, a source of strength earlier in the year,
seems to be coming under increased pressure from import competition,
and the national market may have softened somewhat as well.
Apart from the auto-related segments, textile and apparel producers report continued slack and further deterioration of their foreign trade position. Furniture producers are also reporting soft spots in their markets, but once again import competition and a slowing of inventory accumulation at the retail level appear to be at fault.
Coal production is one of the truly bright spots in District activity. Despite a sharp decline this year in total exports of bituminous steam coal, U.S. coal production is running nearly 20 percent ahead of 1983, and all indications are that the Fifth District may be doing even better. Furthermore, the latest reports show that stocks on hand at domestic electric utility plants are actually down from a year ago, despite the potential for a strike later in the year.
Consumption
Consumer activity is still robust. Further gains in sales,
particularly at department stores and general merchandise outlets,
were reported for the past month. Also, sales of big-ticket items
apparently rose relative to total sales. For the most part,
consumers remain aggressive in their buying and borrowing, although
there have been scattered reports of minor retrenching. Most
respondents expect further expansion of consumer debt, at least over
the remainder of the year. Comments from respondents suggest that
consumers favor higher quality products and respond more
enthusiastically to advertising and promotion of top of the line
items.
Housing and Construction
The construction sector in the District is still very strong, with
steady increases in commercial activity and a recent rebound from a
temporary drop in the residential area. New announcements of hotel,
shopping center, and urban redevelopment projects point to continued
buoyancy in those sectors. Several of the metropolitan areas around
the District are experiencing virtual construction booms in the
downtown areas. In addition, the residential sector is seen as
fundamentally strong even though it may not regain production levels
of earlier in the year. Most respondents expect housing to at least
hold at current levels over the rest of the year.
Banking and Finance
Financial institutions are showing further gains in business and
consumer lending, but there is no indication that their liquidity
positions will prove restrictive in the near term. In general, these
institutions are expecting continued growth in loan demand,
including the business, consumer, and real estate components. Yet,
they seem willing and able to accommodate this growth.
The Outlook and Prices
Businessmen and representatives of financial institutions remain
basically optimistic with regard to activity and prices over the
next six months. On balance, they expect further growth in the
national economy and in their respective markets, although there is
a spreading feeling that the largest gains may be behind us.
Negative factors most often mentioned are interest rates, the level
of imports, and the prospects for strikes in major industries. There
is little concern over inflation, and little reported evidence of
its resurgence.