March 16, 1987
Overview
Manufacturing activity in the District increased again in February
as it did in January, in line with the trend that began last summer.
Producers are optimistic that local and national business conditions
will improve further in the months ahead. Retail sales rose this
past month following an unusually weak January, and store managers
remain optimistic that consumer spending will increase moderately as
the year progresses. Resort and other hotel room reservations for
the summer are running ahead of last year's pace, and 1986 was a
good year for tourism in this area. The market for single-family
homes continued strong in recent weeks except where depressed by
unusually bad weather. Realtors and homebuilders are optimistic
about prospects for their businesses and the economy. In agriculture
there are signs of some easing in credit conditions.
Manufacturing
Manufacturing activity in the region increased in February according
to the results of our latest survey. Twice as many producers report
increases as report declines in shipments, new orders, and unfilled
orders. Producers also report increases in employment and the length
of the workweek. Manufacturers reporting increases in their
inventories of materials slightly outnumber those reporting
declines. Inventories of finished goods appear to have increased.
Prices of raw materials rose in the past month according to 36 percent of the producers; 5 percent report declines, Three-fourths of the producers report a change in the prices they charge for finished goods, with the remaining one-fourth about evenly split between those reporting increases and those reporting declines. Responding to a separate survey question, 45 percent of the manufacturers report that, since the first of the year, the prices of their imported materials have risen.
Optimism among producers is growing. Sixty-eight percent of this month's respondents anticipate increases in shipments and new orders in the next six months, as compared with 61 percent last month. More than one-third of the respondents now believe they will increase employment and lengthen the workweek over the next six months. As was the case last month, this month's survey indicates that over half of the producers expect improvement in general business conditions over the next six months. Added optimism is evident in that a smaller proportion of the respondents—one eighth this month as compared with one fifth last month—expect conditions to deteriorate.
Consumer Demand
Retail sales increased in February according to our survey. Fifty-
nine percent of the responding retailers report increases in sales
and 23 percent report increases in employment. Nine of ten retailers
expect that their business activity as well as general business
conditions will improve in the next six months.
Resort and other hotel bookings for the summer are stronger than last year this time. Overnight spaces at many state parks are already booked to capacity. Public and private sector respondents to a special telephone survey say they expect even stronger tourist activity in 1987 than in the stronger-than-average 1986 season. Tourist businesses expect their profits to rise commensurately.
Residential Real Estate
Realtor and home builder associations report that sales and
construction of single-family homes were quite strong in February,
although activity was depressed by unusually bad weather in parts of
the District. Industry representatives believe 1987 will be on a par
with 1986 if interest rates decline or stay where they are now.
Agriculture
Our most recent survey of agricultural lenders indicates that farm
credit conditions may be easing somewhat. Lenders report fewer
instances of farm customers extending or renewing loans; repayment
rates, however, remain sluggish. Agricultural bankers report falling
interest rates across all categories of agricultural loans surveyed,
although these rates are declining more slowly than nonagricultural
loan rates. Loanable funds are plentiful, and bankers are actively
seeking new farm loans. Collateral requirements remain high,
however, because of uncertainty over agricultural income prospects.
Financial
Several banks and thrifts have extended deadlines associated with
their promotions for home equity lines. Approvals have been delayed
by the heavy flow of applications.