Beige Book Report: Philadelphia
January 21, 1993
Reports from business contacts in the Third District in early January indicated that economic activity was expanding at a modest rate. Manufacturers noted continuing gains in shipments and new orders and rising levels of unfilled orders. Retailers said results for the Christmas shopping period were in line with or above expectations. They reported year-over-year gains averaging around five percent, in current dollars, without significant last-minute price reductions. Auto dealers reported rising sales. Bankers generally said loan volumes outstanding were rising modestly, due mainly to growth in consumer lending.
The outlook in the Third District business community is for continued modest growth. Manufacturers forecast further expansion with some gains in employment possible by midyear. Retailers expect sales to rise during the first half but they are planning cautiously for the period. Auto dealers have a similar outlook. Bankers generally anticipate only slight growth for all types of lending.
Manufacturing
Manufacturing activity in the Third District continued on an upward
trend as the new year began, according to reports from area
manufacturers in early January. Almost half of those contacted said
business was expanding while half indicated they were operating at a
steady pace. Positive reports outnumbered negative ones in virtually
all major industries in the District. Around half of all the firms
contacted were posting gains in both shipments and new orders, and
only a small percentage were registering decreases. While around
half noted steady order backlogs, those indicating rising levels of
unfilled orders outnumbered those with declines by two-to-one.
Although slightly more companies were hiring now workers and
expanding hours than were cutting back, a majority was maintaining
steady employment.
Third District manufacturers generally forecast continued expansion. Two-thirds expect shipments and orders to advance at least through June and one-third anticipate further increases in order backlogs. Although most firms indicate they will hold employment at current levels, one-third plan to step up hiring and boost hours over the next six months.
Retail
Most Third District retailers contacted for this report said sales
for the Christmas shopping period met or slightly exceeded their
expectations. Year-over-year gains averaged around five percent, in
current dollars. Although some retailers said they were left with
inventories somewhat above plan for the beginning of January, none
expressed concern that clearance sales would have a significant
negative effect on fiscal fourth quarter (November-January)
profitability.
Despite the relatively good holiday sales results, few Third District retailers have expectations of strong growth in the first half of 1993. Several noted that credit card usage was high in December, and they anticipate a period of slacker sales while consumers pay down balances. In general, merchants forecast only modest growth in sales through the spring and they expect competition among stores to remain keen.
Auto dealers said sales had risen in recent weeks. They are cautious in forecasting for 1993 but believe sales for the year could exceed the 1992 level by a healthy amount.
Finance
Most of the Third District bankers contacted in early January said
total loan volumes at their institutions wore rising, albeit slowly.
Consumer lending was most often mentioned as the strongest credit
category. Several bankers said demand for auto loans and leases had
increased in December and there was some carryover of the upward
trend into early January. Home equity credit lines were also
reported to be on the rise; however, several bankers noted that loan
consolidation seemed to be motivating much of the increase as not
net lending to home equity borrowers was slight. Most of the bankers
contacted for this report said business loan volume outstanding was
posting only sluggish growth. In general, they said demand for
commercial and industrial loans was not strong, and they described
loan pricing as very competitive. Most bankers also said mortgage
refinancings were trending down and that the rate of growth in
purchase-mortgage lending was easing.
In general, Third District bankers forecast slight growth in lending during the first quarter. They say there is little evidence that business loan demand will increase substantially and they do not expect sustained growth in consumer loan demand until employment and incomes are firmly on an upward trend.