July 31, 2002
Federal Reserve Districts
|Skip to content
Economic conditions in the Fourth District during June and the first half of July showed some improvement from the last report. Shipping activity continued to increase, reports of expansion in manufacturing have spread, and improving sales figures were reported across the retail sector (as opposed to only among discount retailers, as had been the case since the start of the year). Since the last report, however, banking conditions remained mixed, and commercial construction continued to struggle. Most contacts believe that business activity during the second half of 2002 will be stronger than the first, although many qualified their outlook with the caveat that the stock market decline and news of accounting scandals could scare consumers into holding onto their money.
Many contacts reported having increased or planning to increase their capital expenditures. Some manufacturers reported having completed capital expansion projects that were started before the recession. Retailers reported expanding their chains as planned, with no or few delays. Commercial builders reported that many projects that had been on hold were finally begun during the survey period. In the trucking and shipping industry, if companies could, they were purchasing new trucks before prices rise as a result of tighter EPA standards that will take effect in October.
Labor markets showed little change since the last report. The supply of labor remains plentiful, and those few contacts looking to hire reported that skilled labor was not difficult to find. Demand for temporary labor was up slightly, but contacts reported that this was typical for this time of year. Very few contacts plan to hire new workers or recall temporarily laid-off workers, although contacts seemed to think this would likely change in the next couple of months. Health care benefits remain a point of contention between unionized labor and employers, as do pension plan benefits--unions are pushing for defined-benefit plans, as opposed to defined-contribution plans.
Contacts noted mixed price trends. As has been the case for a while, most contacts reported that the costs of health care and insurance were on the rise. Manufacturing contacts, however, reported that the cost of most of their inputs have been falling, as have the prices of their finished goods. Construction and retail contacts reported little change in prices. Steel prices have stabilized over the last month.
Automakers in the District again reported significant amounts of overtime in June. Most plants in the District were closed the first two weeks of July to retool their plants for 2003 models, although some closed the third week of July. At the time of the survey, some plants already had scheduled overtime for the fourth week of July.
Steelmakers reported that business conditions remained steady through June and the first two weeks of July. Contacts in rolled steel reported that most of their mills were operating at or near full capacity and they are expected to be at full capacity through the third quarter because order books for August and September are filled. Demand for stainless steel is weak, considerably lower than at the start of the year. Prices for steel have held steady, as most of the spot price increases have already been implemented and most contract prices are not negotiated until the fourth quarter.
In contrast to most retailers, automobile dealers reported that new car sales steadily declined through June and the first two weeks of July. Used-car sales, however, have remained relatively steady. Dealers are pessimistic about business through the rest of the year, with most expecting year-over-year declines.
Trucking and Shipping
While livestock producers are experiencing a good production year, they reported that current market prices were below the cost of production. Except for cases where price contracts were negotiated, livestock farmers expect to experience year-over-year losses for the first time in many years.