March 18, 1992
According to contacts made in early March, First District retailers appear to be emerging from recession ahead of the region's manufacturing sector. Most retail contacts report an increase in sales but are not sure whether this uptick presages a significant turnaround. By contrast, at most First District manufacturers surveyed, total sales and orders have continued to decline from year-ago levels. Nevertheless, almost half the manufacturers see improvements in demand from the retail trade, residential construction or auto industries, and most expect a modest recovery in the second half of 1992. Reports from local auto dealers and realtors have a positive tone.
Retail
First District retailers, now tallying results for the fiscal year
ending in January, report that 1991 sales were below those of 1990.
However, a late 1991 improvement has extended into 1992 for
retailers of all types. While the rise has boosted retail optimism,
some respondents feel that comparisons to year-ago performance may
overstate the improvement, given the low level of activity during
the Gulf War. Virtually all contacts agree that consumers remain
cautious, but one respondent observes the first significant interest
in regularly priced items in some time.
Despite the noticeable uptick in sales, retailers remain reluctant to change their present plans. Some have experienced increases in the cost of goods sold but will absorb them to avoid raising their own prices. Similarly, inventories remain stable, as retailers believe that demand has not yet increased enough to justify extending themselves. Margins and profits show no consistent trend.
Retailers' employment levels are flat and are expected to remain so. Planned wage increases remain minimal. A few firms opening stores at new locations are hiring to staff them, but for most, capital spending budgets continue to be restrained. Most describe themselves as "guardedly optimistic" that the current upturn marks a reversal in the recent pattern of decline.
Auto Sales
Auto sales in the First District have generally improved over the
past several months. The used car market continues to be relatively
strong. Expectations are mixed, although the majority of dealerships
appear slightly bullish.
Manufacturing
According to a panel of First District manufacturers, January-
February shipments and orders were generally below their year-
earlier levels. Reported declines ranged from slight to 20 percent.
As several contacts pointed out, however, the Gulf war made January
1991 exceptional -- in some cases, exceptionally busy, in other
cases, exceptionally slow. Despite the continuation of generalized
weakness, almost half of the respondents saw modest improvements in
demand from customers in retail trade, residential construction or
the auto and computer industries. By contrast, defense, commercial
aircraft and commercial and industrial construction were described
as still very weak. Views on overseas demand were mixed. In general,
however, Japan and Europe were said to be slowing while Canada and
the United Kingdom show little sign of improvement. By contrast,
Latin American markets were termed promising.
Input prices were described as stable, with several respondents seeking and receiving better prices and service from vendors. Half of the contacts have left their own sales prices unchanged, in some cases for over two years. Others report a less competitive pricing environment. Small price increases taken last fall are sticking, and discounts are declining.
At most manufacturing contacts, employment is below its year-ago level, with declines generally in the 3 to 4 percent range. Roughly half expect the downtrend in employment to continue. A few firms are hiring selectively. By contrast, over half the contacts expect capital spending to equal or surpass last year's levels. These expenditures will focus on maintenance and productivity improvement; only one firm plans to increase capacity.
Most respondents hope to see a modest recovery in the second half of 1992. While a few contacts are starting to think that an upturn could occur even sooner, firms with no evidence of improvement continue to outnumber those where promising signs have materialized into new business. Some contacts see their firms as well poised to take advantage of the turnaround when it occurs, Others report the need for continued restructuring.
Residential Real Estate
First District realtors report increased residential sales compared
with last year and the past few months. Most realtors registered a
slight increase; a few report healthy sales. Sales of condominiums
and high-priced homes are weaker than low-priced, single-family
homes.