September 16, 1984
Business activity in the First District remains robust. Retailers are enjoying strong back-to-school buying and are optimistic about third and fourth quarter results. Manufacturers report that orders and shipments are significantly above year-ago levels. In some cases, the order rate has slowed from earlier this year, but the manufacturers affected do not view this as indicative of future weakness. Both retailers and manufacturers are generally satisfied with inventory levels. Price increases are reported to be very modest and respondents seen to be lowering expectations about future inflation. In banking, business lending is well above year-ago levels, but competition among banks for these loans is intense.
Retail
First District retailers continued to make gains. Two stores
reported bumpy summer seasons but strong results for the end of
August and the first weeks of September as back-to-school buying got
underway. The up-and-down summer results were attributed, in one
case, to the disruption caused by a major renovation and, in
another, to weaker-than-expected tourist purchases. Tourist-related
sales were especially disappointing in Maine where Canadian tourists
appear to have been discouraged by the exchange rate. Other contacts
also mentioned disappointing tourist activity—on Cape Cod and in
Connecticut.
Hard goods continued to outpace soft, particularly women's
sportswear, which is coming down from several years of excellent
growth. Prices of hard goods are stable to falling, and one merchant
commented that promotional discounting of all goods is so widespread
that consumers can always get high value for their dollars.
Inventories, whether high or low, were reported to be causing no
problems. Consumers' credit use is trending up, but merchants do not
consider this a source of concern. One store has moved up its "buy
now, pay next February" promotions from Christmas to the fall.
Manufacturing
A number of manufacturers, producing a variety of products, have
seen a slowing in orders from earlier this year. However, orders
remain healthy, substantially above 1983 levels. The affected firms
do not view the slowing as a precursor to any major weakening in the
economy. Some capital goods producers are experiencing strong and
increasing orders. Overseas markets are said to be picking up
slightly, but subsidiary operations are faring better than exports.
Respondents' capital expenditures are considerably above those in
1983. Preliminary capital budgets for 1985 are about the same as
1984, although one contact noted that it would not take much of a
deterioration in orders to discourage capital expenditures. The
emphasis in capital spending continues to be on productivity
improvements. Respondents were unanimous in reporting only moderate
increases in materials prices; wage pressures were also said to be
moderate. Respondents are increasing their own prices very little,
if at all. Manufacturing inventories have increased in proportion to
sales; for the most part, the firms contacted are not uncomfortable
with these increases, but one plans a major inventory reduction
drive.
Banking
Reports from the banking industry indicate that loan demand is
strong but the competition for loans is also vigorous. One
respondent finds that business lending, particularly for commercial
and industrial real estate, has been robust. However, another
contact observes aggressive competition for loans from out-of-state
banks.