June 17, 1992
Overview
Contacts around the Sixth District reported that economic conditions
have continued to improve at a slow but steady pace since mid-April.
Retailers noted a moderate gain in sales of both consumer durables
and non-durable goods. Auto dealers saw an improvement in showroom
traffic and sales. Manufacturers observed increased activity in an
expanding range of industries. Developers noted steady single-family
home building activity, though commercial construction has not
improved. Bankers reported modest gains in business loan demand and
somewhat greater improvement in consumer loan activity. In general,
wages and prices have remained flat.
Consumer Spending
Most retailers in the District reported moderate sales increases
through early June. Contacts said that sales were again strongest
for nondurable items such as apparel, but several noted gains in
furniture and appliance purchases. Auto dealers also reported
increased showroom traffic and sales. Still, retailers have remained
cautious in placing new orders and have maintained lean inventory
levels. Contacts do not anticipate significant inventory rebuilding
in the near future. Convention- and tourism-related activity has
also shown improvement. In commenting on the recent airfare price
war, agents reported that price reductions had boosted individual
travel, but they had little impact on family vacations and business
travel.
Manufacturing
Manufacturing activity in the District continues to improve.
Increases in new orders and production were noted in a broad range
of industries, with firms linked to residential housing activity
recording the biggest gains. Carpet and home appliance producers saw
strength in new orders. Several furniture and cabinet manufacturers
stated that they have boosted hours worked to meet increased demand
for their products. Lumber and wood producers have added to
employment rolls in response to expanding residential construction
activity.
Shipments have continued to pickup for a producer of men's wear. New orders have increased steadily for a firm producing sports apparel. One large textile firm producing for institutional customers reported that it was building inventories in anticipation of future increases in demand. However, several textile and apparel manufacturers noted that retailers continue to keep inventory levels low.
Business activity generally remains weak for firms in the energy sector. However, some suppliers of equipment and services to the oil and gas industry believe that this long-troubled market may be stabilizing with the recent firming of natural gas prices. Defense and aerospace industry contacts also reported a slowdown in industry activity as orders have been canceled and delivery times pushed back because of defense cutbacks. These cutbacks spread acquisitions over a longer period of time.
Construction
Most realtors reported steady home sales in May and early June, but
activity has slowed from the rapid pace recorded earlier this year.
Sales remain strongest in the low-to-middle price ranges. Resale
inventories remain adequate as more people have put their homes up
for sale in response to improved marks conditions. As a result,
realtors have not seen much change in the price of existing homes.
Contacts report that new home inventory levels are relatively low. Consistent with this observation, most builders stated that residential home building activity has continued to improve. Multifamily construction, however, is still weak despise reports that occupancy rates are relatively high in some areas.
Commercial construction activity remains at a minimum. Although some commercial realtors have seen an improvement in leasing activity and a firming in rental rates, contacts in several cities say that markets remain over supplied. Excess office space reportedly has kept rental rates at levels too low to justify new building.
Financial Services
Loan demand in the region increased slightly in May from April
levels. Most bankers observed a small increase in business loan
activity and a somewhat larger increase in consumer loan demand. The
surge in residential mortgage refinancings that occurred earlier in
the year, however, has almost worked its way through the system.
Most contacts reported improved quality in loan applications of all
kinds.
Wages and Prices
Most contacts report that input prices and wages remain stable.
Firms that have expanded their employment rolls in the last month
report that ample supplies of labor have allowed them to hire new
workers at existing wage levels.