Beige Book Report: Philadelphia
May 4, 1994
The trend in economic activity in the Third District remained positive in April, according to reports from area businesses. Manufacturers said they continued to post gains in orders and shipments, and the increases were fairly widespread across the industrial sectors in the region. Retailers reported a rebound in sales in March as extreme winter weather conditions abated, and the pickup appeared to continue in April. Auto dealers reported recent gains as well. Bankers noted growing demand for consumer loans, especially for auto loans and credit card purchases. They also noted a slight increase in commercial and industrial lending. Residential mortgage activity, however, was easing as refinancings dropped substantially.
The outlook in the Third District business community is generally positive. Manufacturers forecast continued improvement, including increases in orders and backlogs, although, on balance, they do not expect to boost employment. Retailers, noting signs of growing consumer confidence, expect the upward sales trend to persist through the summer. Auto dealers generally believe sales will be strong unless auto loan rates move higher. Bankers echo merchants' feelings that consumer confidence is improving, and they expect personal lending to remain strong. They also forecast gains, albeit slight, in commercial and industrial lending.
Manufacturing
Reports from Third District manufacturers in April indicated that
industrial activity remained on the rise, although the number of
firms posting gains during the month declined somewhat from the
prior month. Around 40 percent of the firms polled said they
received more orders for their products in April than they had in
March and they were stepping up shipments commensurately. Less than
20 percent noted decreased demand for their products. Gains were
fairly widespread among industrial sectors in the region.
With respect to employment, three-fourths of the firms contacted for this report were maintaining steady work force levels, and nearly one in five hired additional workers during April. On balance, working hours were unchanged during the month.
Looking ahead, about half of the managers at area industrial plants expect orders and shipments to rise over the next six months and about one-third anticipate that order backlogs will move up as well. Few foresee weaker demand for their products. Despite the generally optimistic outlook, plans at area manufacturing firms call for just steady employment levels over the next six months.
Retail
Most of the retailers contacted for this report said sales in late
March rebounded from the low levels prevailing earlier in the year
when a series of winter storms kept shoppers at home and forced
store closings. Some merchants said that a relatively early Easter
boosted sales in March, possibly at the expense of April sales.
Nevertheless, most retailers also said that sales in April were
running at a healthy pace.
Third District merchants expressed generally positive views of the near future. Several said that consumer confidence appeared to be improving and could propel growing sales for the rest of the year.
Auto dealers in the region said sales picked up strongly in April after a bleak first quarter. Most are optimistic that sales will remain strong this year as long as auto loan rates do not rise from current levels.
Finance
Bankers at major Third District banks generally indicated that loan
volumes were rising moderately in April, propelled mainly by growth
in consumer installment lending, especially auto loans and credit
cards. While several noted that commercial and industrial lending
seemed to be on an upward trend, most said the increase was
marginal. Nearly all described residential real estate lending as
easing, with refinancings off substantially.
In general, bankers contacted for this report expect modest growth in loan demand through the rest of the year. They expect consumer lending to be relatively strong, reflecting growing consumer confidence, but they do not anticipate more than slight gains in business lending unless overall economic activity moves to a steeper growth path.