December 6, 1983
Overview
There is little indication that the pace of recovery in the Fifth
District has slowed. Expansion continues in virtually every sector,
with month to month and year to year gains being reported nearly
across the board. Absence of such gains in particular activities is
generally attributed to special factors. Food processors, for
instance, are encountering the relatively small agricultural output
of the past season. Such special factors have resulted in some
seasonally depressed employment and unemployment numbers, but,
generally, employment is recovering sharply in most parts of the
District. Retail sales remain among the sectors leading the
recovery. Most areas are reporting sharp gains in sales. Credit
demands remain modest as both consumers and businesses seem to be
funding purchases from current or past income. Expectations of
continued improvement in activity are widespread, with only
retailers sensing that little further progress is likely.
Manufacturing
Total manufacturing activity continues to show improvement by nearly
every measure. Shipments, orders, and order backlogs were up over
the past month. Inventories were nearly unchanged as a slight drop
in finished goods offset a small rise in materials on hand. Total
stocks are still considered at or somewhat above desired levels, as
is current plant and equipment capacity. Employment, average weekly
hours, and weekly earnings also continued to advance in recent
weeks.
Employment gains were recorded in most sectors, particularly textiles, furniture, and seasonal agriculture related industries. In the last mentioned category, gains were less than normal, however, and seasonally adjusted levels were accordingly down. Durable goods manufacturing, apart from the consumer areas such as furniture, continued to show mixed results.
Manufacturers responding to our survey report little change in prices they are receiving, but some scattered increases in prices paid. Respondents remain broadly optimistic. Nearly every one expects further gains in activity, nationally, locally, and in his respective market, over the next two quarters.
Consumer Spending
By all accounts, retail sales are still very strong and rising. Big
ticket items are at least holding their own. With sales building
into the holiday season the way they have, prospects for the final
quarter are excellent. Retailers' expectations of a good season have
apparently been substantiated during the first few days. The first
weekend of the selling season was generally characterized as the
best in years. Thus, while retailers do not seem to foresee much in
way of further gains, apart from seasonal factors, they do not
expect any near term losses. Automobiles sales also seem to be
holding the substantial gains of recent months.
Housing and Construction
Sales of residential real estate are generally reported to have
picked up again in recent weeks as mortgage interest rates
stabilized or even edged downward. Construction of new units
continues at a good pace in most areas. No significant decline,
other than seasonal, is expected before spring, and will be
unlikely, even then, if current sales rates hold up.
There has been little apparent change in the commercial and industrial sector where activity continues to improve, but only at rather modest rates. Expectations remain generally positive, but somewhat less robust than in many other sectors.
Banking and Finance
Loan demand still does not seem to be keeping pace with economic
activity. Lenders have observed only modest increases in consumer
lending, particularly non-auto related lending. Business loan demand
also remains soft. This relatively weak loan demand and the recent
strong growth of liabilities of financial institutions are still
thought to be causing some deterioration of overall credit quality.
Also, District financial institutions generally seem to expect the
slow growth of loan demand to continue for some time.