October 24, 2001
Federal Reserve Districts
|Skip to content
Business activity in the region slowed in mid-September following the attacks in New York and Washington and picked up slowly late in the month and in early October. Manufacturers reported declines in shipments and orders in October compared with September. Retail sales have moved up after being extremely slow in mid-September, but they have been just level compared with a year ago. Auto sales also moved up, but remain below last year's pace. Bank loan volumes rose slightly in September, with gains in business and residential real estate loans, but consumer credit has been flat. Travel and tourism activity remains weak, although it has improved since mid-September.
Looking ahead, businesses in the District have mixed views, and all indicate that they face greater uncertainty than usual. Manufacturers forecast increases in orders and shipments during the next six months. Retailers, however, expect sales in the remaining months of the year to be even with or to fall below last year's results. Auto dealers also anticipate a slowdown in sales. Commercial bank credit officers expect continued slow growth in commercial and industrial lending, but they are uncertain what course consumer lending will take. They expect residential real estate lending to ease.
Local manufacturers' forecasts have been virtually unchanged, although several firms noted that some of their usual customers have reduced or postponed orders, and they are uncertain when regular buying will resume. Nevertheless, more than half of the firms surveyed in early October forecast increases in orders and shipments during the next six months. They expect business to improve gradually, with momentum building through next year. Capital spending plans at area firms call for slight increases, on balance, during the next six months.
Local store executives have reduced their forecasts for the year-end shopping season, leading some to predict a year-over-year decline. Although most retailers indicated that their current inventory levels were not high, some stores have cancelled orders or resold on-order goods to other stores. As revenues continue to track below plan, stores have laid off workers.
Overall sales of cars and light trucks picked up in the region in late September and early October, but remain well below year-ago levels. Manufacturers' incentives have boosted customer traffic, but sales have not risen commensurately, and inventories have been rising. Dealers expect some reduction in the sales rate as the year closes, and they have cut back orders to manufacturers.
Commercial bankers in the Third District expect business lending to remain on a positive trend, although they anticipate only slight gains. Several banks indicated they were restricting lending in sectors where activity has weakened, such as travel related businesses, commercial printing, and retailing. Bankers in the region do not expect lending for home purchases or residential real estate development to continue at the current pace, but they see no signs yet that a sharp drop is imminent. Bankers expect consumer lending to track retail sales, but they say the outlook for consumption spending in the region is uncertain.
Banks in the Third District reported that their net interest margins have become very tight as market interest rates have eased. Several indicated that they cannot reduce deposit rates further without risk of losing balances. Bankers said the need to maintain deposit rates limits their ability to reduce lending rates.
Transportation and Travel