June 17, 1992
Reports from Third District business contacts in early June suggested that business conditions were improving slowly. Manufacturing activity continued to move up, on balance, and hiring at Third District industrial plants appeared to be on the increase. Retailers generally reported steady or slightly higher sales for May compared to the prior month and year. Bankers described loan volume as steady, with slight gains in mortgage and auto loans being offset by continuing declines in commercial and industrial lending.
Looking ahead, Third District business contacts forecast slow growth. Manufacturers are relatively optimistic. They predict a continuing increase in activity and they plan to step up hiring and capital spending in the second half of the year. Retailers anticipate improvement in the fourth quarter, but not strong gains. Bankers expect consumer lending to move up slowly but they believe business loan demand will remain soft.
Manufacturing
Reports from Third district manufacturers in late May and early June
indicated that, on balance, industrial activity continued on an
uptrend. One-third of the firms contacted said they were stepping up
shipments while one-half said their shipments had been running at a
steady pace. Reports on new orders paralleled the shipments
situation. Durable goods producers indicated somewhat more positive
conditions than did nondurables producers, although chemical
companies generally reported gains in business. The manufacturing
employment picture appeared to be brightening; although two-thirds
of the firms contacted for this report were maintaining steady
payrolls, one-fourth were adding workers.
Looking ahead, almost two-thirds of the manufacturers contacted said they expect further gains in the second half of the year while nearly one-third said they anticipate just steady business. Overall, managers at Third District plants foresee increases in orders and shipments during the next six months. The positive outlook is apparently leading manufacturers in the region to step up hiring and capital spending plans; nearly four-out-of-ten said they will add workers and increase outlays for plant and equipment in the second half of the year.
Retail
Third District retailers generally indicated that sales in May were
even with, or slightly up compared to both April sales and sales in
May of last year. Store officials said the recent sales pace had
been in line with their expectations. There were some reports that
big ticket items were not selling as well as other goods. Nearly all
the merchants contacted for this report characterized their selling
efforts as highly promotional, involving extensive discounting from
list prices.
Looking ahead, most Third District retailers expect sales during the summer to be seasonally slow. They are hoping that sales will improve in the fourth quarter of this year, but they do not anticipate a strong upturn because they expect only a very gradual increase in consumer confidence.
Finance
Third District bankers contacted in early June described overall
loan volume outstanding as virtually flat. Gains in mortgage and
consumer lending were being offset by continuing declines in
commercial and industrial loans. Bankers said they were booking new
business loans but the amounts were less than the amounts being paid
off by existing borrowers. Lending to middle-size and small
businesses was described as particularly soft by several bankers who
said loan demand in these markets was weak. As to consumer lending,
several bankers said credit card balances were being paid down but
there had been an upturn in auto loans, pushing total personal loan
volume up slightly in recent weeks.
Most of the bank lending officers contacted for this report expect loan demand from businesses to remain soft. They believe firms are still focusing on cutting costs rather increasing sales to boost profitability. They also said consumer lending is likely to grow only slowly, as they foresee slow economic growth and a sluggish advance in consumer confidence.