January 19, 2005
Federal Reserve Districts
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Business activity in the Third District expanded in December. Manufacturers reported increases in orders and shipments during the month. Retail sales of general merchandise during the holiday shopping period rose from the previous year, with modest gains for most stores and greater increases among luxury goods retailers. Auto sales were roughly steady during December. Banks reported that overall lending continued on an upward trend in December. Service companies generally reported a steady to slightly stronger pace of growth at year-end compared with the fall.
Contacts in the Third District business community expect economic activity in the region to continue on an upward trend through the winter, and some contacts anticipate a slight quickening in the growth rate as the year progresses. Manufacturers expect increases in shipments and orders during the next six months. Retailers expect modest growth in sales during the year, but auto dealers expect sales to weaken. Bankers believe overall lending will continue to rise, although they do not anticipate much growth in residential mortgage loan volume. Service companies expect some pickup in the pace of growth for their businesses.
The region's manufacturers generally expect further gains in business activity. Just over half of the firms surveyed in December expect their shipments and orders to increase during the next six months, and around one in ten expect decreases. On balance, area manufacturing firms are scheduling increases in capital spending and planning to add employees. Although current conditions vary among the region's major manufacturing sectors, the outlook for the first half of the year is positive in almost all of them.
Third District manufacturers continued to report rising prices, with about the same percentage of firms noting increases during December as in November. During the next six months almost two-thirds of manufacturers expect increases in input prices, and about one-half expect increases in the prices of their own goods.
Auto dealers in the region reported roughly steady sales in December, on balance, although results varied by dealership. In general, dealers selling domestic makes saw some slowing in sales, and dealers selling imports saw increases. Although manufacturers have maintained promotions on 2004 models and extended them to 2005 models, many dealers' inventories remained above desired levels. Dealers expect sales this year to be off at least a few percent from last year.
Investment companies and stockbrokers in the region have been receiving strong cash inflows, and most of the money has been directed toward equities. In response to the greater volume of business, some securities firms are adding employees and increasing their information technology capacity. Investment company executives expect business to continue to expand this year, but they do not expect stronger growth in 2005 than in 2004.
Employment agencies in the region reported moderate increases in demand for workers in the past few months, and they expect the pace of hiring to be steady through the winter. Companies in manufacturing, trade, and the financial sectors have relatively stronger hiring plans than do employers in other sectors.