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Economic activity in the Fourth District held steady since mid-February. In general, factory output was unchanged, though shipments by steel producers and service centers were on the rise. Production at auto assembly plants increased slightly. The housing industry remains weak with little expectation of improvement in the near future. Commercial building contractors reported steady to increasing business and a rise in the number of inquiries. Sales by District retailers were flat to declining. Bankers cited a slight improvement in consumer lending and a small drop in business loans. While there has been some tightening in credit standards, credit is widely available to qualified applicants. Energy production was stable to increasing. And the demand for freight transport services was soft.
Employment levels and wages were largely unchanged Districtwide. However, energy companies reported strong employment growth and some wage pressure. Staffing firms cited a slight increase in the number of job openings, persons seeking jobs, and placements. Demand was greatest in health care and professional business services. A significant rise in commodity-based input prices was reported by manufacturers, commercial contractors, and restaurateurs.
For the most part, output by District factories has not changed during the past six weeks. Reports of decreased production were attributed to declines in residential construction or seasonal adjustments. On a year-over-year basis, reports were evenly split between production slowdowns and increases, with only one company experiencing a significant decline. Outlook by manufacturers is best described as cautious, with a few contacts noting a softening in demand. Steel shipments were on the rise for both producers and steel service centers. Expectations call for demand to remain at current levels or to increase during the second quarter. The strongest end markets for steel include energy and capital goods. District auto production increased slightly in February. Output by domestic nameplates increased while their foreign counterparts showed a small decline. In terms of year-over-year comparisons, auto production was up slightly.
Several contacts noted an increase in exports. Capital spending remains on plan, with most producers saying that 2008 expenditures will be at or above 2007 levels. Three contacts told us they plan to increase spending substantially on capacity expansion projects. Access to credit has not been an issue for manufacturers. However, a few mentioned that their accounts receivable have been impacted by customers who were negatively affected by tightening credit standards. Almost all manufacturers reported strong price increases for raw materials, especially metals and thermoplastics. However, less than a third had raised their prices in response, and only a few contacts plan to raise prices in the near future. On balance, there was little change in employment levels, and limited hiring is expected in the near future. Wage pressures are not an issue though many respondents expressed concern about rising health-care costs.
Residential contractors reported new home sales were flat to up slightly during the past six weeks. Almost all contacts affirmed that traffic has picked up, but they are unable to translate it into sales. Looking forward, home builders believe 2008 sales will be similar to those in 2007, with a slight pickup anticipated toward the end of the year. Since our last report, new home prices have been relatively stable though some discounting is still taking place. Material prices have held steady, while overall building costs are down slightly due to competitive pricing by subcontractors.
Commercial contractors reported that business has been steady to increasing slightly since our last report and on a year-over-year basis. Inquiries have picked up and backlogs are at acceptable levels. Credit was available to all our contacts. Expectations call for construction activity to remain at current levels or to strengthen. Most contractors have experienced some increase in the cost of materials, with the price of steel rising sharply. Workforce levels remain largely unchanged. Pricing for subcontractor services is competitive.
District retailers reported flat to declining sales in February when compared to the previous month. Expectations are for some weakness in sales to continue throughout the second quarter. Auto dealers reported sales of new and used vehicles were unchanged to declining. However, most dealers anticipate an upturn in sales during the coming weeks. Except for agricultural products, vendor prices were relatively stable. Restaurateurs reported passing through their increased costs to customers. Employment levels were adjusted to meet seasonal demands or for staffing new stores. Although capital spending remains on plan, half of our contacts told us that they intend to reduce future expenditures.
Energy. Oil, gas, and coal production has been steady to increasing slightly over the past six weeks. Looking forward, a majority of our contacts told us they expect to see a rise in the demand for energy. Reports indicate that spot and contract prices have increased across the board. In general, equipment and material costs were stable. Capital expenditures remained on plan, with most respondents anticipating a pickup during the next few months. Nearly all producers increased their workforce size. However, many of them told us that it is becoming increasingly difficult to attract qualified workers, which is contributing to upward pressure on wages.
Transportation. Business was soft during the past six weeks with freight volumes running below available capacity. In general, transportation executives expect current market conditions will continue into the near future. Several contacts noted difficulty in balancing downward pressure on freight prices against rising fuel costs. However, there has been some easing of customer resistance to increases in fuel surcharges. A few respondents reported significant declines in capital expenditures with future spending dependent on the level of business activity. For the most part, hiring was limited to driver turnover. Some upward pressure on wages was linked to companies trying to retain drivers.
Most bankers reported demand for business loans was steady or declining since our last report. Those showing increased loan volume attribute it to greater utilization of existing lines. Overall loan demand by consumers was steady to increasing slightly; however, bankers noted that requests for home equity loans were on the decline. The residential mortgage market remains sluggish with most activity limited to refinancing. A majority of bankers told us that they are tightening credit standards to screen out riskier borrowers, but that credit is available to qualified businesses and consumers. A small increase in delinquencies was also reported. Almost all respondents experienced growth in core deposits, while a majority saw an easing in margin pressure. On balance, there has been a small decline in employment levels across community and national banks. Wage pressure is not an issue though several contacts expressed concern about rising health care costs.