May 5, 1993
Reports from Third District business contacts in April suggest that economic activity in the region was continuing to move up at a very modest pace. Manufacturers generally indicated that shipments and orders were increasing while inventories remained steady. Retailers were posting slight gains, on balance, for April compared to the same month a year ago. Auto and truck dealers also reported year-over-year increases. Most bankers, however, indicated that loan volume was flat.
The consensus forecast among those contacted for this report calls for slow growth. Manufacturers believe that business will continue to move up, but their level of optimism has declined since the beginning of the year. Retailers expect consumer spending to gain slowly during the rest of the year. Bankers anticipate that business lending may pick up soon, amid strong competition among banks for commercial loans. They have mixed views on the course of personal lending in the near future: some foresee a slight increase but others expect loan volume to remain flat.
Manufacturing
Reports from Third District manufacturers indicated that activity
remained on an upward trend, on balance. While just under half said
business was steady, firms making gains outnumbered those
experiencing decreases by two-to-one. Overall, both new orders and
shipments were rising, and inventories were holding steady. Business
continued to improve for nearly all major manufacturing sectors in
the District; the exceptions were furniture and lumber--where
conditions were steady--and food processors, whose business had
slipped from March. Employment appeared to be steady, on the whole.
The outlook among Third District manufacturers remains positive although the level of optimism has declined from the first months of the year. Nonetheless, around half of those contacted in April said they expect business to continue moving up while fewer than one-in-five expect a decline. On balance, the view is that orders and shipments will rise in tandem over the next six months keeping inventories under control. The outlook for employment is modestly positive: one-fourth of the firms polled for this report plan to add workers over the next six months while, twice the number who plan cuts.
Retail
Third District retailers surveyed in the second half of April
generally indicated that sales were increasing although the rate of
gain was slow. Many said that the March snowstorm had significantly
curtailed results for the month but consumer spending had rebounded
since. Still, according to most of the merchants queried, the April
sales rate was not exceeding expectations they had formed prior to
the March storm.
For the most part, forecasts by Third District merchants are that sales will continue to move up during the year. Bad weather in both February and March is blamed for a poor start and store executives said that, consequently, the fourth quarter will have more than its usual significance for their full-year results. Most expect continuing improvement in overall economic activity, and they expect retail sales to share in that improvement.
Third District auto dealers lost sales in March due to the storm, but reports in April indicated that sales were on the rise. Dealers selling domestic cars appeared to be making greater gains than foreign auto dealers. Truck dealers said sales of both light and heavy-duty trucks were on an upward path, and several reported substantial increases over the year-ago sales rate. In general, Third District auto dealers expressed optimism that sales will continue to improve through the spring.
Finance
Comments from Third District bankers indicated that loan activity
had been flat in recent weeks. While some banks reported increases
in consumer and mortgage lending, these gains appeared to have bean
offset by declines at other banks, leaving loan volume for these
credit categories in the District virtually unchanged. Most of the
bankers contacted for this report said commercial and industrial
lending was steady although there were a few reports that lending to
small businesses had picked up recently. All bankers described loan
markets as very competitive and said net interest margins were
decreasing as a result of more aggressive loan pricing.
Despite the slackness in lending in April, several bankers said they were receiving an increasing number of inquiries and applications from potential business borrowers. In general, bankers who reported this interest expected to see growth in commercial and industrial loans booked in the near future. The outlook for consumer lending is not as clear. Some bankers said consumers would continue to consolidate and reduce debt, but others indicated that personal lending at their institutions appeared to be taking a slight upward trend.