August 7, 1996
Firms in the major business sectors of the Third District gave varied reports on activity for July. Most of the manufacturers surveyed noted increases in shipments and orders; however, producers of building products and industrial equipment were experiencing slower business. Most of the retailers contacted said sales were healthy but the year-over-year gains in June and July were below those achieved in the early spring; some merchants even noted slight declines. Auto dealers generally said sales have been steady. Most of the bankers polled for this report 3said loan volumes outstanding were flat, and they continued to describe competition for commercial lending as strong. Some also said that, while consumer loans remained level, delinquencies were on the rise. Recent comments from employment agencies in the Philadelphia area indicated that demand for clerical workers remained healthy and that there has been some increase in the demand for manufacturing workers.
Manufacturing
Manufacturing activity in the Third District continued to expand in
July, according to reports from area firms. Half of those polled
indicated they had stepped up shipments since June while only one in
ten noted declines. Half of the manufacturers contacted also
reported increases in new orders, and only one in five said orders
had slipped from the prior month. The improvement in business was
reported from nearly all the major industrial sectors in the region;
however, manufacturers of building products and industrial equipment
said that an increase in interest rates earlier this spring
adversely affected demand for their products.
Area manufacturers extended working hours slightly and hired more workers in July, and they are planning some further increases in staffing levels during the second half of the year. While the balance of opinion among area manufacturers is that business will continue to improve during the third and fourth quarters, several noted that both domestic and foreign competition appears to be keeping prices in check.
Retail
Third District retailers contacted in late July gave mixed reports.
While most said sales were continuing at a healthy rate, many noted
that year-over-year gains in June and July were below the gains in
earlier months, and several merchants indicated that their sales
were just even with or slightly below the levels of a year ago. In
particular, apparel sales appeared to be slowing and growth in
housewares and electronics sales was easing. Discount stores, which
sell more hard goods, were achieving better results than department
stores, which are largely dependent on clothing sales. Despite the
apparent slowing of sales, most of the retailers surveyed for this
report did not indicate that inventories were excessive.
Auto dealers reported that sales were running at a steady pace, modestly above the rate for last summer. Light truck sales were up more than car sales on a year-over-year basis. Most dealers expect sales to continue at the current rate, although some are apprehensive that growing consumer debt burdens could lead to a downturn later in the year.
Finance
Most of the Third District bankers contacted for this report said
total loan volumes outstanding at their banks had been level in
recent weeks. They continued to describe competition for new
commercial loans as strong and net interest margins as tight.
Bankers also said consumer lending was flat, and they generally do
not expect this category of credit to increase in the near term.
Some bankers said they expect a combination of slower consumer
spending and more restrictive credit standards to limit or reduce
consumer lending in the second half. Some also expect the rate of
consumer loan delinquencies to rise further this year until tighter
credit standards become more prevalent.
Services
Employment agencies and personnel contracting firms in the
Philadelphia area reported continued demand for clerical and data-
entry workers from banks, law firms, and television-shopping
companies. Recently, employment agencies have also seen increased
demand for temporary workers from manufacturers. Additionally,
business at employment contractors has increased as a result of the
outsourcing of certain business functions by major firms in the
region.
In several instances, according to both temporary employment agencies and contractors, the back-office staffs that these firms eliminated have become employees of the agencies and contractors supplying services to these firms, but many of the former employees have taken some reductions in pay and benefits.