March 13, 1984
Overview
Nearly all the evidence suggest that activity in the Fifth District
is continuing to expand at a fairly rapid pace. Manufacturers
responding to our survey report widespread gains in new orders and
order backlogs, and modest further increases in shipments.
Inventories were virtually unchanged. Retail sales continue to
record substantial increases month to month as well as year over
year. In addition, the sales increases are spreading to nondurables,
although big ticket items seem to be keeping pace. Construction is
also providing continuing support to District activity, with
strength in all sectors and in most geographic areas. Sales of
residential property also remain quite strong, and builders clearly
expect this trend to continue.
Manufacturing
Manufacturing activity has recovered from a brief mid-winter lull,
and is showing considerable buoyancy in nearly every sector. Across
the District new orders, order backlogs, and shipments were all up
in the past month, with new orders showing particularly broad-based
strength. The expansion has clearly spread to the more basic
industries such as primary metals and chemicals. Also, coal output
is running well ahead of year-earlier levels. Manufacturers report
virtually no change in inventories over the past few weeks and, for
the most part, find current levels acceptable. There is some growing
sentiment, however, that current plant and equipment capacity is
inadequate. If this view continues to spread, it would be a change
from a long-standing concern about overcapacity. Reports offer some
evidence that there is currently some reevaluation of expansion
plans going on, perhaps with an eye toward enlarging them.
District manufacturing employment also rose sharply from year end, as did employee compensation. Manufacturers are also encountering more frequent increases in prices paid and received for goods.
Consumer Spending
District retailers report a continuation of the lofty gains in
activity that began before year end 1983. Year to year sales
increases at individual establishments and chains are still running
at double digit rates according to available information. More and
more, the strength appears to be in non-durable lines, although it
is difficult to find any evidence of slowing in sales of durables.
Certainly, automobiles sales are proceeding apace. And with housing
construction and sales at current and projected levels, declines in
furniture and appliances sales seem unlikely.
Price increases do not yet appear as prevalent at the retail as at the manufacturing level, but the elimination or reduction of promotional programs may be a factor. In any event, list prices remain essentially flat. Retailers appear to have done some inventory rebuilding in recent weeks, but remain, for the most part, comfortable with current stocks.
Housing and Construction
The construction industry is still a bright spot in the District
despite voiced concerns about overbuilding in the commercial sector
and about housing sales prospects. In both areas, in fact, activity
appears to be gathering momentum. It is our impression that the
pipeline of commercial projects remains full. New announcements are
not uncommon, and the outlook within the industry seems to be
improving.
On the residential side, sales are holding up quite well for both new and previously owned units. Figures may be distorted as a result of unusually warm weather in February. However, the overall impression must be that the fundamentals on the housing markets are all positive. By all evidence, construction of new units is accordingly strong. Speculative building is being revived, as expectations of strong spring sales gain support.
The Outlook
The conditions described above have clearly affected expectations,
which remain strongly positive. In nearly every sector a majority of
respondents are expecting continued growth over at least the next
two quarters. Most manufacturers surveyed, for instance, expect
further gains nationally, locally, and in their respective markets.
The largest number of positive responses comes on the question of
the outlook for the firm's market. In other words, some who see
little further gains nationally still expect their own business to
improve. Retailers are also generally optimistic, expecting further
gains in all areas. Also, builders and those in related or affected
industries are planning on significant activity as the weather
improves and for the rest of the year.