August 5, 1992
Overview
Contacts in the Sixth District generally reported that the economy
is slowly but steadily expanding. Fewer retailers reported gains
than in earlier months, but a growing number of auto dealers have
begun to note a pickup in showroom traffic and sales. Manufacturers
in a broad range of industries continue to record modest increases
in output, and a small number of firms have reported adding
production workers recently. Developers noted some recent leveling
in single-family home building, but activity is improved over weak
year-ago levels. Commercial construction, however, has not improved.
Most banks report higher quality lean portfolios, and there were few
reports of constrained credit supply. Wages and prices have remained
essentially unchanged.
Consumer Spending
After several months of broad-based increases in retail sales,
reports in June and early July were mixed. Sales of durable home
furnishings and appliances have slowed, though sales of non-durables
continue to show modest strength. Retailers are being very
conservative in their sales projections for the rest of 1992 and
many stores are maintaining historically lean inventory levels. Some
report that they will not commit to adding jobs until there is a
more substantial improvement in consumer demand. Reports from auto
dealers, however, generally have been more positive: a small but
growing number of dealers across the District noted improvement in
both showroom traffic and sales in the last six weeks.
Manufacturing
Manufacturers in a broad range of industries report modest
improvement in production and new orders. Textile and apparel firms
have been particularly busy, especially producers of knits and
active wear. Residential construction and remodeling continues to
stimulate carpet, home appliance, furniture, and cabinet makers;
although new orders have been slowing at some plywood producers.
Producers of electronics in Georgia and Florida report current
increases in production and shipments and further expectations or
improvement in activity over the next six months. Firms in each of
these industries have reported that they are either lengthening
factory workweeks or adding new employees.
However, business remains weak in some important sectors. Companies linked to commercial construction continue to report declines in production and new orders. Firms dependent upon defense department contracts expect reduced factory workweeks and permanent job losses.
Construction
Most realtors report that home sales gained modestly in June and
early July. However, some noted that gains have slowed in comparison
with the first quarter of the year. Again, first-time home buyers
have contributed the most to recent sales, but some realtors have
noted improvement in the upper price ranges as well. Builders report
that single-family construction has leveled off this summer, but
that new building activity remains above weak year-ago levels. Most
contacts have not observed any improvement in multifamily
construction, although there are reports of low apartment vacancy
rates in certain markets. Commercial building remains slow, with
most activity coming either from private built-to-suit or government
building projects.
Financial Services
Bankers report that loan demand was mixed in the region in June and
early July. Residential lending slowed noticeably from the first
quarter of the year, although many institutions reported a pickup in
mortgage refinancing applications in the first two weeks of July.
Many banks noted an improvement in consumer lending for new and used
auto purchases in June, but commercial loan demand remains weak.
Bank loan portfolio quality continues to improve and several banks
noted that they have become more aggressive in seeking new lending
opportunities.
Wages and Prices
Most contacts reported that wages and prices remained stable in
June. Firms that were hiring during the period found that ample
supplies of labor allowed them to hire new workers at existing wage
levels.