April 20, 2005
Federal Reserve Districts
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Business activity in the Third District increased in March. Manufacturers reported rises in orders and shipments during the month. Retail sales of general merchandise were up modestly compared with the previous month and with March of 2004. Auto sales rose from February to March and were slightly above last year's level. Banks reported that lending continued on an upward trend. Firms in the service sector indicated that their business activity was rising at a moderate pace.
Third District business contacts generally expect further improvement in the region's economy in the months ahead. Manufacturers expect increases in shipments and orders during the next six months. Retailers anticipate an improved rate of sales during the spring, with modest year-over-year gains. Auto dealers also expect sales to pick up in the months ahead, although they do not anticipate an increase for the year as whole. Bankers forecast a roughly steady rise in overall lending. Service companies expect business to expand further at the current rate of growth.
The region's manufacturers generally expect further growth in business activity. Nearly half of the firms surveyed in March expect their shipments and orders to increase during the next six months, and around one in ten expect decreases. A substantial portion of the region's manufacturing firms surveyed in March (about one-third) plan to increase capital spending during the next six months, and very few expect to reduce it.
Third District manufacturers reported rising prices in March, on balance, although the number of firms noting increases during the month was somewhat lower than in the fall and early winter. Firms in all but a few of the major manufacturing industries in the region indicated that they had experienced increased input costs and raised prices for their own products in March compared with February. During the next six months 50 percent of the manufacturers polled in March expect increases in input prices, and about 10 percent expect decreases. About 30 percent plan to increase the prices of their own goods, and about 10 percent expect to reduce prices. This represents somewhat less widespread expectations of higher prices than prevailed during the fall and early winter.
Auto dealers in the region reported a healthy increase in sales in March compared with February, although compared with March of last year the increase was slight. Inventories continued to be above desired levels, except for some imported models. Most of the dealers contacted for this report said they expect sales to move up further during the spring, although they anticipate sales for this year as a whole will be down from last year. Dealers said manufacturers are continuing to offer high levels of rebates.
In general, banks in the District are meeting their deposit growth goals, although some indicated that deposits have not increased as strongly as they had expected. These banks also noted that depositors are becoming increasingly reluctant to place funds in long-term deposits because they anticipate further increases in deposit rates this year. Investment companies reported gains in cash inflows in recent weeks but indicated that inflows were down compared with the same period last year. Although investors continued to favor equity funds over bond funds, executives at investment companies said investors appear to have become more cautious about committing funds to investments of any kind.
Employment agencies in the region reported growing demand for workers, and they expect the pace of hiring this spring to be better than last year. Companies in manufacturing, trade, services, and the financial sectors have relatively stronger hiring plans than do employers in other sectors. Manufacturing and service companies indicated that they have increasing needs for workers in technical occupations. Health care workers are also in growing demand.