September 16, 1984
The Third District economy is still growing in September, led by strength in the retail sector. However, there is some easing in activity in other sectors. Manufacturers are seeing a slight slowdown, although some specific indicators are posting gains. Bankers report that consumer lending is thriving while commercial lending is slowing its pace. In the agricultural sector, farmers, with few exceptions, report a good year. Area resorts, faced with rainy weather and tough competition for tourist dollars, have turned in a mediocre season. In general, contacts look for continued slowing in all areas except retail sales and consumer lending.
Manufacturing
Respondents to the September Business Outlook Survey indicate that
growth in the local manufacturing sector is still positive but is
easing. Forty-three percent of the manufacturers surveyed this month
say business activity continues to increase while only 6 percent
report a decline; just over half say there has been no change over
last month.
Despite the apparent cooling of the current business climate, most specific indicators show improvement over last month. New orders and shipments lead the pack, with 44 percent and 52 percent of manufacturers, respectively, citing increases. Only inventories and unfilled orders remain unchanged in September, with delivery time, employee payrolls, and the average workweek all posting slight gains.
The near-term outlook for local manufacturing is beginning to dim, according to this month's survey. However, while the portion of respondents expecting further growth in the next six months is the smallest it has been since June 1980, it still remains significant at 43 percent. Manufacturers' expectations about specific indicators are in keeping with the anticipated easing in future business. Survey respondents look for a reduction in inventories, and they plan to hold employee payrolls and the length of the average workweek at current levels.
The portion of respondents reporting increases in industrial prices has fallen for the second month in a row. Seventy percent of the executives polled this month say input prices are stable, and a like portion reports no change in the prices of finished goods. Looking ahead, approximately two-thirds of respondents predict that they will be paying higher prices for raw materials within six months and about half expect to receive higher prices for their output.
Retail
Retailers in the Third District report strong sales over the past
six weeks, with back-to-school promotions and cool weather in late
August giving sales a boost. Contacts in the retail industry
indicate that big-ticket home furnishings are moving well, along
with children's apparel. Inventories are slightly heavier than
usual, relative to current sales, but are in line with expectations
for the next four months. Sales are currently running 10 to 25
percent above last year's levels, and retailing executives say they
are looking forward to tallying up an overall good year with the
help of the holiday season.
Financial
Third District bankers are sending mixed signals on their loan
activity. Contacts continue to see a slight slowdown in the rate of
growth of commercial loans but report that the dollar volume of C&I
loans is still up substantially over year-ago levels. Consumer
lending has not faltered at all and is registering increases in the
range of 20 to 28 percent over last year. Local bankers are lowering
their expectations for commercial loan growth in the near future,
but their optimism continues to be buoyed by strong prospects for
growth in the consumer lending area.
The prime rate has been holding steady at 13 percent since the end of June. Third District bank economists foresee no fluctuations in that rate before the end of the year. The general easing in the economy has induced contacts to revise their federal funds rate forecasts downward slightly with the year-end rate expected to hover around 11.5 percent.
Agriculture
Third District county agriculture agents report that 1984 has been a
premium farming year in terms of weather. After a dry, underpar
season last year, plentiful rainfall has helped to produce a bumper
crop of both sweet and feed corn, along with a healthy crop of
blueberries and soybeans in south Jersey, exceptionally large fruits
in Pennsylvania, and a strong potato crop in Delaware. Field and
cereal crops are very good, and farmers expect to benefit from the
easing of restrictions on grain exports. Weather did have some
damaging effect on two crops this year. Peaches in New Jersey are
down by about two-thirds due to a frigid winter, and tomato yields
are running about 60 percent of normal, owing to cracking caused by
too much rain.
Dairy farmers in Pennsylvania are having a good year and note that the consumption of milk is up about 6 percent. Chicken farmers, their flocks depleted last fall and winter by Avian flu, have excellent prospects for production when the quarantine on chickens is lifted shortly.
Farm prices, in general, have held steady since last year. While record yields in corn and potatoes in particular tended to push prices for those two crops lower, corn farmers still can expect to be "in the black" for this year. Grain sales to the Soviet Union are expected to boost prices and help local farmers.
Farm income is expected to be slightly better than last year, although peach farmers will be hit fairly hard. Peach crop yields in New Jersey and the surrounding Pennsylvania and Delaware counties were low enough to qualify farmers for Farmers Home Administration low-interest loans.
Tourism
Resort business in the Third District was disappointing to most
vacation-spot entrepreneurs this year. Wet, unseasonable weather
kept many vacationers at home through midsummer, but that was only
one of the factors keeping the lid on local travel. Both European
travel, encouraged by the exceptionally strong dollar, and summer
Olympics in Los Angeles were tough competitors for tourist dollars.
South Jersey seashore reports saw a drop in visitor volume of about 10 percent from last year, a result not only of rainy weather and cold ocean temperatures but also of the strong American dollar, which has cut the number of Canadian visitors virtually in half. Only in Atlantic City, where casino gambling flourishes, was business better than last year.
In the Pocono Mountains, as elsewhere, weather caused a disappointing June and July, but August showed surprising strength due mostly to last-minute bookings. Gross dollar volume this summer could run 3 to 5 percent above last season. Pocono resorts have excellent prospects for the fall.