January 19, 1994
Reports from Third District business contacts in early January were generally positive. Manufacturers said demand for their products picked up in December and that both shipments and new orders were moving up at the beginning of January. Retailers indicated that Christmas sales ran a bit above their expectations, which had ranged around 5 percent in dollar terms on a year-over-year basis. The increases appeared to be broad-based among types of stores and varieties of merchandise. Bankers generally described loan demand as steady or slightly up, due in large part to seasonal factors, although they indicated that mortgage refinancing activity had eased significantly.
The outlook in the Third District business community is positive although not strongly optimistic, with most of those contacted for this report forecasting continued moderate improvement in 1994. Manufacturers expect to see orders grow through the first half, and they indicate they may step up hiring as the new year progresses. Retailers expect sales to increase in line with overall economic growth. Bankers believe consumer credit is on a growth trend and some noted signs of increased interest in borrowing by businesses as well.
Manufacturing
Manufacturing activity in the Third District continued to increase
at the turn of the year, according to reports from area industrial
firms in late December and early January. Around one-third of those
contacted said shipments and orders were moving up, while more than
half said their shipments and orders were running at a steady pace.
The increase in shipments was leading to a drop in inventories among
regional manufacturers. However, the stepped-up demand was not
affecting order backlogs, which were reported to be holding level by
most manufacturers. A slight pickup in employment, on balance, at
area plants may be attributable to the increased demand for their
products.
The outlook among Third District manufacturers is generally optimistic. Among those contacted for this report, just over half expect business to improve through the first half of the year, while around one-third anticipate steady conditions, and only a few expect business to decline. Overall, area manufacturers expect orders and shipments to grow over the next six months, and they plan to hire more workers during the period.
Retail
Third District retailers generally described sales for the Christmas
period as somewhat above expectations. Year-over-year gains in the
range of 5 to nearly 10 percent, in dollar terms, were common among
all types of stores and for a broad range of merchandise. As has
been the case in recent years, the bulk of the sales came in the
last week before Christmas and in the week after. While markdowns
were prevalent, retailers indicated price reductions were not
extensive, and most expect to show good profits for the fiscal
fourth quarter (November-January).
Retailers said they believe consumer confidence is growing, but they do not forecast strong gains in spending. Looking ahead, merchants expect sales to be seasonally slow during the winter but to pick up about in line with overall economic growth in the spring.
Finance
Third District bankers contacted in early January noted the usual
seasonal increase in total loan volume outstanding, mainly consumer
credit and some business lending, but they said that mortgage
refinancing activity had slowed considerably. While several bankers
said seasonal patterns appeared to be dominating the recent pickup
in lending, they expressed some optimism that a more basic positive
trend might be taking hold. Most believe growing consumer confidence
will lead to increased personal borrowing, and some cited increased
interest in new or expanded credit facilities among potential
business borrowers as a sign that commercial and industrial loan
volume might turn up in the new year also.