December 1, 2004
Federal Reserve Districts
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For the six-week period through the middle of November, economic activity appeared to expand little in the Fourth District. Production levels at the District's durable and nondurable goods manufacturers remained flat, as in August and September. Sales at the District's retailers also remained largely unchanged throughout this period, conforming to the pattern of reports since late spring. Residential construction continued to slow, while seasonal declines in demand weakened some of the momentum that nonresidential builders had been reporting. District banks reported steady loan demand among their commercial and consumer clients. Finally, shipping firms continued to report robust demand.
There were some signs that input costs began to stabilize for manufacturers, and retail price pressures remained limited. While hiring still seemed to be modest among many business contacts, staffing services companies are optimistic about their prospects for the first quarter. Contacts at staffing services companies also reported an increase in the number of employed workers interested in switching to a new job.
As in the most recent report, roughly half of the respondents from durable goods manufacturers reported having higher inventories than desired. By contrast, most nondurable goods producers reported that their inventories were not above acceptable levels. In general, durable and nondurable goods producers are planning little hiring and few increases in capital outlays over the near term.
For the first time in months, cost pressures appeared to moderate for many manufacturers through the six weeks ending in mid-November. In fact, several firms reported that their input costs were flat throughout this period. Lower prices for petroleum-based products and steel appeared to account for much of the change. Nevertheless, manufacturers' materials costs remain higher than at this time last year, and, accordingly, firms continue to attempt to raise their prices--many successfully so--to recover the increases in input costs.
Some contacts had expected sales to strengthen following the presidential election, but sales through the first half of November don't appear appreciably better than before. Accordingly, firms are cautious in their forecasts for the upcoming holiday selling season, anticipating, at most, only slightly better sales than at this time a year ago. Most retailers reported that their inventories were well-managed and about the same as a year ago, though auto dealers generally had higher inventory levels than desired.
Automobile dealerships continued to offer an array of sometimes substantial incentives. One newly introduced incentive allows buyers to lock in current interest rates on a subsequent purchase for a five-year period. Prices for used cars also continued to fall. For other retailers, reports regarding changes in prices were mixed. For firms that attempted to increase some product prices, these changes were reportedly resisted by consumers. Regarding hiring, seasonal workforce additions were expected to be about the same as at this time a year ago; plans for permanent staff additions are still few.
After recent reports indicated better business conditions for nonresidential builders, activity appeared to slow in the six weeks through the middle of November. However, many contacts attributed this to a normal seasonal slowing. While many firms don't anticipate much more activity through the remainder of this year, there is optimism about stronger activity in 2005. Materials costs were flat for most firms in recent weeks, though higher than at this time last year. No nonresidential builders reported plans to hire, but several indicated that they may shed some workers in the weeks ahead.
Trucking and Shipping