April 15, 2009
Federal Reserve Districts
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Economic activity in the Third District continued at a slow rate in March. Manufacturers, on balance, reported declines in shipments and new orders. Retailers indicated that sales were nearly steady but well below the level of a year ago. Motor vehicle dealers reported a nearly steady but low rate of sales during the month. Bank loan volume has been flat in recent weeks, and credit quality has continued to deteriorate. Residential real estate sales were slow but appeared to be close to steady. Nonresidential real estate investment and construction activity continued to decline. Service-sector activity has been generally slow in recent weeks. Business firms in the region reported level or falling input costs and output prices in March.
The outlook in most industries in the Third District is subdued. Manufacturers forecast some gains in shipments and orders during the next six months, but little improvement is expected in other sectors. Retailers expect sales to remain near the current pace through spring, and auto dealers expect sales to remain around the current rate for most of the rest of the year. Bankers anticipate little growth in lending until both business and consumer confidence is restored. Residential real estate agents and home builders expect sales to remain near the current rate or to pick up slightly through the spring and summer. Contacts in nonresidential real estate expect leasing and purchase activity to remain weak through the rest of the year. Service-sector firms expect activity to be slow during the next few months, at least.
The outlook among Third District manufacturers is slightly positive, although fewer forecasted improvement when recently surveyed than did so at the time of the previous Beige Book. Among firms polled in March, around one-third expect new orders and shipments to increase during the next six months and around one-quarter expect decreases. On balance, area manufacturers continue to report that they will be reducing capital spending during the next six months.
Third District auto dealers reported that sales remained very weak in March. Dealers said the availability of financing for car purchases continued to limit sales, especially for domestic makes that do not have support from manufacturers' finance companies. Dealers also reported continued difficulty in obtaining inventory financing. Looking ahead, dealers see no sign of an upturn until consumer confidence is restored and financial conditions improve.
Real Estate and Construction
Prices of both new and existing homes in the region continued to fall, but contacts said the rate of decline appeared to be easing. Builders continued to offer substantial incentives to purchasers, and larger firms continued to provide low-rate mortgages to some buyers. Builders and agents expect sales to remain at a relatively slow pace through most of this year even if there is a slight pickup through the spring and summer. Most of those contacted for this report do not expect significant improvement until the spring of next year.
Nonresidential real estate firms indicated that construction, leasing, and purchase activity continued to decline during the first quarter. They also reported that rental rates have been edging down. Many previously announced office, educational, and institutional construction projects have been postponed. Contacts expect nonresidential real estate leasing and construction activity to remain weak through most of the year. However, they said that infrastructure construction would likely increase in the second half as federal stimulus funds are spent, and they believe there could be slight improvement in some office markets in the fourth quarter, if economic conditions stabilize, because several large leases will need to be renewed at that time.
Prices and Wages
Firms in a wide range of industries continued to report salary freezes or reductions and reductions in fringe benefits. A number of private firms have announced hiring freezes and layoffs, and employers in the private sector as well as state and local government have imposed unpaid furloughs.