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The economy in the Fourth District continued to grow at a modest pace during the past six weeks. In general, manufacturing output was stable to increasing. Activity in commercial construction was steady, with backlogs at acceptable levels. Home builders remain uncertain as to when the housing market will turn around. Some do not expect an upturn until turbulence in the housing finance markets subsides. Retail sales in the District were mixed. Reports on commercial and consumer lending show demand was steady or decreased slightly. The mortgage market remains sluggish, while auto lending increased. Oil and natural gas production showed little change. And price competition in the trucking industry intensified.
On net, reports point to a slight increase in employment levels across the District. Staffing firms reported an increase in the number of permanent openings, while the number of temporary job openings decreased slightly. The greatest demand for workers was in the health care industry. Overall, the number of job seekers has declined since mid-July and on a year-over-year basis. Wage pressures were limited to the energy sector and some highly technical and professional occupations. Manufacturers and builders told us that input prices are stable, though some are stable at an elevated level.
Most District manufacturers reported that production has been stable to increasing since mid-July. Further, a majority said they had increased their output on a year-over-year basis. Looking forward, almost all of our contacts anticipate production remaining at current levels or increasing slightly. However, several respondents told us that they are expecting some softening in their respective markets due to the housing slump, tightening credit, and higher commodity prices. Auto assembly plants reported a significant production decline on a month-over-month basis, most of which is attributable to retooling for model changeovers. Although both domestic and foreign nameplates saw declines due to model changeovers, the rate of decline by domestic producers was almost double that of their foreign-nameplate counterparts. Shipments by steel producers and service centers were relatively stable, even though July is traditionally a slow month. Strong end markets for steel include non residential construction, energy, and defense.
In general, plant utilization rates were at normal levels to 100 percent capacity. Manufacturers reporting idle capacity were primarily in the chemical and auto industries. Almost all manufacturers told us that capital expenditures were on plan since mid-July. However, since the last reporting period, the number of respondents who had expected to increase their capital investments in the next 12 months has declined. The decline was ascribed primarily to a softening economy. When asked about input prices, the majority of producers we contacted said they were stable, or stable at an elevated level. Global demand for metals and energy was the most often cited reason for elevated prices. Only a few of the manufacturers surveyed had attempted to increase their own prices during the past six weeks. Looking forward, over half said they either have plans to increase prices during the fourth quarter or they will try to raise prices if raw material costs remain high. With respect to their workforce, about 20 percent of our contacts reported adding employees during the past six weeks. Hiring in the near future is expected to be slow, with little wage pressure anticipated.
New home sales continue to be slow and are down on a year-over-year basis. The conversion rate of traffic to sales remains low; however, cancellations are no longer a concern for most builders. Looking forward, contractors remain uncertain about when the housing market will turn around. A few said they do not expect an upturn until turbulence in the housing finance markets subsides. Most of our contacts reiterated that inventories are approaching acceptable levels and that they are using discounting as a means of managing inventory. In general, new home prices have been stable since mid-July. Several builders told us that they have reinstituted workforce reductions or have not replaced personnel who have left voluntarily.
Most commercial contractors told us that business has been steady since mid-July as well as on a year-over-year basis. Segments showing strong activity include healthcare, transportation, and manufacturing. The majority of our respondents is satisfied with their current backlogs and is optimistic about business opportunities in 2008. For the most part, material costs were stable during the past six weeks--metals being the exception. In turn, almost all builders held their own prices steady.
District retailers reported mixed results since mid-July. In general, apparel retailers experienced declining sales, whereas general merchandise sales held steady or increased slightly. Looking forward, merchants anticipate little change in sales trends. On balance, supplier prices were stable during the past six weeks. Hiring has been limited to new store openings. Any wage pressures are reported to be the result of the recently enacted minimum wage law. On net, automobile sales have been slow, with used vehicles showing increased sales figures and new vehicles posting declines. Sluggish showroom traffic was attributed to very hot weather. Dealer expectations for the next few months are mixed.
Demand for commercial and consumer loans has held steady or decreased slightly since mid-July. Industries seeking loans were broad based. The majority of our banking contacts reported an increase in auto loans, while demand for home equity loans was mixed. The mortgage market continues to be sluggish, with no improvement expected in the near future. Core deposits were stable to increasing slightly. In general, credit quality for consumer and business applicants remains stable, while almost half of our respondents stated that delinquencies have increased slightly.
Oil and gas producers reported production levels were flat to increasing slightly since mid-July. Plans for drilling additional wells are on target. Since our last report, prices received for natural gas have declined while crude prices increased. Producers noted a moderating trend in rising material and equipment costs. Hiring was widespread, with a few contacts saying that it is difficult to find qualified employees. Almost all respondents told us that wage pressures are continuing, especially for skilled field personnel.
Demand for trucking and shipping services was characterized as flat during the past six weeks by most carriers. Representatives told us that there is intensifying price competition within the industry. As a result, it is very difficult to pass on increased costs to customers. Further, the ability to recover 100 percent of fuel costs through surcharges is beginning to erode. Capital expenditures, primarily for truck engines, have been flat to declining. Wage increases were limited to annual cost-of-living adjustments. And a few carriers reported hiring drivers in order to increase capacity.