November 3, 1993
Business conditions in the Third District appeared to improve modestly in September and early October, according to reports from businesses in the region. Manufacturers noted gains in new orders and shipments as well as increased hiring. Retailers generally said that sales were running slightly above the year-ago pace. Bankers indicated that total lending was edging up, due mainly to an increase in loans to consumers.
Looking ahead, manufacturers expect further gains in shipments and orders, and they plan to step up hiring and increase capital spending over the next six months. Retailers generally forecast just a slight increase in sales for the coming Christmas shopping period compared to last year, and they report they have placed orders for seasonal merchandise accordingly. The outlook among bankers contacted for this report is positive but restrained. On balance, they expect moderate growth in overall economic activity and lending.
Manufacturing
Manufacturing firms in the Third District reported some improvement
in business in mid-October. About one-third of the companies
contacted said they were stepping up shipments, and about one-
quarter noted recent increases in new orders as well. A steady
shipment rate was reported by about half of the firms, and two-
thirds indicated that new orders were running at an even pace. Gains
were prevalent among manufacturers of apparel and nonelectrical
machinery, and among makers of stone, clay, and glass products.
Declining activity was reported by producers of metal and paper
products. Overall, more firms in the region reported stepped up
hiring than layoffs, although on balance the workweek was just
steady among the reporting firms.
For the near future, about half of the surveyed firms anticipate continuing gains in orders and shipments, and less than one-in-ten expect business conditions to worsen. In line with this generally optimistic outlook, more than one-quarter of the companies queried said they plan to add workers and increase capital spending over the next six months.
Retail
On balance, Third District retailers contacted for this report said
sales for September and the first half of October were slightly
above the year-ago period, in current dollars. It appeared that
discount merchants were making greater gains than ether types of
stores and that apparel sales were showing relatively more
improvement than other lines of merchandise. Several store
executives noted that they were maintaining lean inventories.
In general, area merchants are cautious in their forecasts for the upcoming Christmas sales period. While they expect sales to be above last year's levels, they indicate that they have exercised restraint in ordering merchandise for the season.
Finance
According to reports from bankers, loan vole outstanding in the
Third District was moving up modestly in early October, due mainly
to growth in consumer lending. Bankers said most types of consumer
credit were on the rise, with notable gains in auto loans. Most of
the bank lending officers contacted for this report said residential
real estate financing continued to be healthy, with borrowers
preferring fixed-rate loans for both purchase mortgages and
refinancings. Bankers also noted that consumers were opting for
fixed-rate home equity loans as opposed to variable-rate home equity
credit lines.
Based on comments from bankers, it appears that commercial and industrial lending ranged from flat to up very slightly. Several noted that small business lending and lending to middle market companies were showing some signs of improvement. Nevertheless, most said corporate borrowers were continuing to reduce debt and appeared to be planing further downsizing of their operations.
The balance of opinion among bankers contacted for this report is that total lending will continue to move up gradually in tandem with overall economic activity. They expect business borrowing to grow slowly, at best, held back by continuing restructuring among larger firms. They anticipate that the current upward trend in consumer lending will be maintained unless economic growth slips from its current pace.