December 8, 1993
Economic activity in the Third District remained on a modest upward trend in November, according to reports from the region's business community. Manufacturers noted gains in shipments and orders, although they indicated employment was only steady. Retailers generally said they were posting slight gains from a year ago, and auto dealers said that sales, while off slightly in recent weeks, were still running at a healthy pace. Bankers indicated that overall lending was up slightly, due mainly to growing consumer loan volume. Residential real estate activity had picked up, according to realtors, but demand for commercial real estate was stagnant.
Most business contacts in the Third District forecast a continuation of current trends. Manufacturers expect orders and sales to continue growing, and they are planning increases in capital spending. Retailers forecast year-over-year sales increases of 3 to 5 percent, in dollar terms, for the Christmas season. Bankers expect a seasonal increase in consumer borrowing, but, in general, they expect commercial and industrial lending to edge up very slightly, at best. Realtors and home builders believe the stepped-up pace of home sales will persist for at least another six months.
Manufacturing
Reports from Third District manufacturers in November indicated that
business continued to move up. While just over half said their
shipments and new orders were running at a steady pace, nearly one-
quarter said they were seeing increases in orders and about one-
third said they were stepping up shipments. Among major industrial
sectors in the region, food processors, chemical producers, and
nonelectrical machinery manufacturers reported gains; manufacturers
of paper products and primary metals noted declines in business. For
the manufacturing sector as a whole, employment was steady.
Looking ahead, just over half of the area manufacturers contacted for this report expect continued improvement over the next six months. They forecast parallel increases in orders and shipments, and nearly half plan to boost capital spending. On balance, comments from manufacturers indicate that overall employment may edge up somewhat during the winter.
Retail
Most of the Third District retailers contacted in late November said
sales for the month were running slightly above the year-ago pace
and about in line with plans. Executives at area stores gave sales
forecasts for the Christmas season ranging from 3 to 5 percent above
last year's levels, in dollar terms. Several merchants said they
were implementing expanded promotional efforts, such as increased
advertising and extended store hours. Most retailers described
inventories as under control and said they had been careful in
ordering merchandise for the Christmas sales period.
Auto dealers generally said sales in November had slipped a bit from October but were running at a good pace. They said new models were being well received, and they expect to close the year on a healthy sales trend.
Finance
Comments from Third District bankers indicate that overall loan
demand was moving up only slightly in November. A majority of those
contacted for this report said consumer lending was up a bit because
of growth in credit card borrowing, auto loans, and home equity
credit, but a significant number said consumer lending was just
steady. Commercial and industrial lending was described as flat by
most of the bank loan officers interviewed, while a few said they
have seen recent increases in borrowing, especially by middle-market
companies. Nearly all said the upward momentum of applications for
residential mortgages was easing as the volume of refinancings
declined, while the volume of purchase mortgages was holding steady
or increasing.
Bankers expect consumer borrowing to increase seasonally, but they do not anticipate much growth in commercial and industrial lending. They also expect refinancing activity to taper off.
Real Estate and Construction
Real estate brokers and home builders in the region said activity
picked up in late October and appeared to be continuing. Realtors
generally ascribed then stepped-up pace of sales to buyers'
perceptions that mortgage rates have bottomed and to sellers'
willingness to accept less appreciation in the price of their homes.
Realtors noted increased sales in both the lower and middle price
ranges. Despite the recent pickup, realtors said the inventory of
homes for sale remains high. Nevertheless, they expect the higher
pace of home sales to persist at least another six months.
Commercial real estate activity remains flat, according to brokers and property managers. Office vacancy rates in the region have changed little from a year ago according to some brokers' surveys, and demand for retail space was still described as soft. Some pickup in demand for industrial space was noted, however.
Some positive developments have been noted in regional construction activity. In addition to increased residential building, some utility and other nonresidential projects have gotten under way. Overall, however, the gain in construction activity is slight.