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Economic activity in the Fourth District has weakened somewhat since mid-July. Factory output was largely stable, though auto production declined. Residential construction remains weak, with no improvement expected going into 2009. Most commercial builders told us that business is steady; however, a growing number of them reported a decline in inquiries. Sales by District retailers showed a small improvement during July. Demand for business loans was relatively stable, while lending to households was flat to declining. Energy production was steady to increasing. And the market for freight transport services has softened.
Employment levels were largely unchanged and wage pressures were limited to energy producers. Staffing firms saw a small increase in the number of job openings and job seekers. Job vacancies were greatest in health care and high-skilled manufacturing. Accounts of rising input prices, especially for metals and petroleum-based products, were widespread. However, we heard a few reports that the rate of increase in commodity prices is moderating.
Output by District factories was largely stable during the past six weeks. Reports of shifting production levels were attributed to seasonal factors or shrinking demand by the housing and auto industries. On a year-over-year basis, reports were evenly split between production slowdowns and increases. Manufacturers anticipate that orders will be relatively steady during the upcoming months. For a majority of our respondents, capacity utilization was near normal levels. Steel producers and service centers reported shipping volume was at or below seasonal expectations, which they attributed to a downturn in the auto and construction industries. The strongest end users for steel include energy and agriculture. In general, our contacts believe market conditions for steel will soften in the upcoming months. District auto production showed a sharp decline in July on a month-over-month basis due primarily to retooling for model changeovers. In terms of year-over-year comparisons, District auto production was down slightly, with most of the decline reported by domestic makers.
Capital spending remains on plan, with almost half of our respondents saying that they plan to raise spending in the upcoming months. Although credit remains available, we heard several accounts of borrowers seeing more stringent terms and higher interest payments. Most manufacturers reported continuing price increases for raw materials, especially steel, petroleum-based products, and processed food ingredients. In response, half of them raised their product prices recently. Looking forward, expectations call for inflationary pressures to continue. However, only a third of our respondents said that they would consider additional price increases in the near future. On net, employment levels and wages at District factories have been stable, with little hiring anticipated in the near future.
Residential builders reported little change in market conditions. However, a few noted a slight up-tick in sales on a year-over-year basis. Looking forward, builders are not expecting any turnaround in the industry for the next several months. Further, several anticipate that banks will continue tightening credit standards. List prices on homes held steady since our last report, while discounting remains widespread. Accounts of price increases for concrete, shingles, metal products, and fuel were common. In contrast, lumber prices were stable to declining. Subcontractors are readily available at very competitive rates. General contractors reported employment levels were unchanged and no wage pressures.
Most commercial contractors told us that business conditions have been holding steady during the past six weeks. Although backlogs remain relatively strong, inquiries have declined. Nearly all of our contacts expect a small downturn in business in 2009. Several contractors commented that banks continue to tighten credit standards, nonetheless, financing is available. Contract pricing remains fairly stable, and the rapid rise in steel and fuel prices is beginning to abate. Workforce levels were largely unchanged, and little wage pressure was reported.
In general, District retailers reported that July sales showed a small improvement on a month-over-month basis across all industry segments. However, our respondents were mixed in their assessment when asked about fourth quarter sales. Reports from auto dealers indicate that purchases of new cars were flat to down, while used vehicle sales were mixed. Purchases of SUVs and trucks were characterized as poor. Dealers anticipate sales in the coming weeks to remain stable or decline slightly. With the exception of clothing, retailers told us that vendors raised their prices. In response, store owners passed some of the increases through to their customers. Capital spending remains on target, with no revisions planned in the upcoming months. Employment levels and wages were relatively stable.
Demand for business lending has been steady to slightly down. Segments showing strength include commercial real estate and mid-market companies. On the consumer side, loan demand, including home mortgages, was flat to declining. Reports on home equity lines of credit were mixed. Many bankers told us that the availability of business and consumer credit continues to tighten. Reports showed that the number of delinquencies on business and consumer loans increased slightly, while credit quality was steady to declining. A majority of our contacts said that they are experiencing core deposit growth in a highly competitive market. Although lending rates are slowly increasing, it is insufficient to offset the rise in deposit prices. As a result, reports of compressing interest margins were widespread. A small decrease in employment levels across District banks was reported. However, personnel activity was firm-specific and not reflective of an industry trend. Wage pressures are not a major issue at this time.
Oil, gas, and coal production has been steady to increasing during the past six weeks. Looking forward, our contacts expect the demand for coal to increase, while oil and gas demand remains largely stable. Reports indicate that the price received for coal increased, while oil fell and natural gas was unchanged. Materials and equipment costs continue to rise, especially for steel and fuel. Capital expenditures were on plan or slightly higher than projected. A third of our respondents told us they expect to increase capital spending in the upcoming months. We heard a few reports of tightening credit; however, our contacts do not see it as a serious issue at this time. Half of our respondents told us that they hired additional employees during the past six weeks, while most plan further hiring in the near future. Wage pressures are an issue in the oil and gas segment due to competition for skilled workers.
The market for freight transport services has been relatively soft since our last report. Freight executives told us that the auto, consumer products, and housing industries are primarily responsible for declining demand. Several executives commented that the transport market has hit bottom; however, they do not expect a turnaround until sometime after the first of the year. Rising fuel prices remain the biggest cost increase confronting our contacts. Most shippers continue to pass it through to their customers via a surcharge. Capital expenditures remain on target, but are below 2007 levels for most companies. Little change in capital spending is expected during the coming months. For the most part, hiring was limited to driver turnover, and any wage increases fell within industry norms.