July 1, 1983
Overview
Business activity is expanding across a broad front in the Fifth
District, yet the pace of expansion appears moderate. Manufacturing
firms, generally, report recent gains in shipments, new orders, and
order backlogs, but little change in inventories. Retail activity
also appears to be improving as both total sales and relative sales
of big ticket items are reported to have risen in recent weeks.
Inventories at the retail level apparently rose sharply, however.
Construction activity has also firmed substantially in most areas.
Total employment has made only very modest gains, although the
employed are working longer hours, and earning higher wages then
earlier in the year. Expectations in most sectors are strongly
positive. Loan demand at District banks and thrifts is also on the
rise, but remains spotty in most areas, lacking solid support from
any particular sector.
Manufacturing
Rising levels of shipments, new orders, and order backlogs continue
widespread in the manufacturing sector. Recent leaders, such as the
textile and apparel groups, have been joined by building materials,
especially lumber and wood products where some extraordinary gains
have recently been reported. On the other hand, primary metals and
paper continue to lag somewhat. Manufacturers inventories were
nearly unchanged over the past month as a slight rise in finished
goods was nearly offset by a very minor reduction in materials on
hand. Inventories appear to exceed desired levels on balance,
although a majority of firms seem to be satisfied with current
levels.
Manufacturing employment appears to have eked out a modest gain in recent weeks. Employment was actually reduced at some plants, however. Most of the recent pickup in activity has been accomplished by increasing the length of the workweek, in some cases by as much as 25% (32 hours to 40 hours per week). It appears that this process still has a way to go before output gains begin to lead directly to higher levels of employment. Current plant and equipment remains somewhat in excess of desired levels, but much more narrowly so than in most recent months.
Consumer Spending
Consumer activity continues to be a positive factor in the bigger
picture, but now appears less robust than was thought to be the case
one or two months ago. District retailers continue to report
increases in sales, however, and are selling an increased proportion
of big ticket items. Scattered strength in consumer installment
lending further supports this conclusion. Available evidence
suggests that furniture, appliances, and autos continue to provide
considerable strength to the overall sales picture.
Inventories were up over the past few weeks at the retail level, but generally remain in line with desired levels. Most retailers also appear comfortable with existing numbers and sizes of outlets.
Housing and Construction
The situation in the construction sector appears to have changed
little in recent weeks. Housing construction, overall, remains much
improved, but the improvement is very spotty. Much of it continues
to be concentrated in or near metropolitan areas. Most rural areas
continue to lag. There appears to be growing concern over the
prospects for housing in coming months. This concern seems to center
on the future direction of mortgage interest rates. How the housing
recovery will progress is generally felt to hinge on mortgage rate
developments. For now, however, available housing continues to sell
very well in most areas.
Commercial and industrial construction activity continues to be buoyed by work in progress. New work and prospects for new work are sparse at present.
Banking and Finance
Overall, loan demand at banks and thrifts appears to be rising very
modestly, and there is no readily apparent pattern, either
geographic or for types of loans. Gains in consumer installment
lending are among the most widespread, although in some areas
mortgages or business loans are leading the way.