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Third District economic activity continued to advance in April. On balance, manufacturers reported increases in shipments and orders during the month, and the number of firms noting slower business decreased compared to the first quarter. Retailers generally said sales remained on an upward track, although the rate of gain eased after Easter. Auto sales have been steady and above the rate recorded in the early spring of last year. Bankers noted a pickup in business lending and a continuing high rate of mortgage activity. Consumer loan volume outstanding has been virtually steady.
Looking ahead, Third District business contacts see further growth. Manufacturers anticipate a continued increase in orders, which they expect to fill without putting pressure on their production capacity. Retailers foresee a relatively steady upward trend in sales. Bankers expect business lending to grow modestly through the year, but they do not expect consumer lending to move up significantly.
Manufacturing
Manufacturers in the Third District reported a rising pace of activity in April. Shipments and orders were increasing at just over one-third of the firms contacted during the month and were steady at slightly less than half of the firms. There were fewer reports of slower business in April than in earlier months of the year. The improvement was broad-based. Among major industry groups, manufacturers of apparel, fabricated metal products, lumber, and building products posted particularly good results. Only producers of primary metals saw business ease in April. A further sign of strengthening demand for manufactured goods is the rise in order backlogs at area plants in the past two months, after several quarters of slackening. There were a few reports of increased prices for inputs among firms polled in April, but most companies indicated that prices of both the goods they purchase and their own products have been steady.
Third District manufacturers selling in overseas markets report that foreign demand, especially in Asia, remains low, although they indicate that conditions there no longer appear to be weakening. Domestic demand is generally described as improving. Overall, manufacturers in the region expect further growth in orders, and they expect production to keep up with the increase in demand.
Retail
Retailers in the Third District reported a healthy pace of sales in March and April, with year-over-year gains in both months. Several merchants said the rate of increase eased after Easter, in the usual seasonal pattern, but the basic upward trend remained intact. Sales of spring clothing, home furnishings, and jewelry were described as especially strong. Department stores reported better results in March and April than they did earlier this year, and discount and specialty stores continued to post high sales rates. Despite generally meeting or exceeding planned sales rates, store executives said they were keeping inventories at conservative levels. According to store executives, their caution reflects a continuing emphasis on overall cost control. But one executive at a large regional chain said he anticipates stepped-up purchasing later this year in response to expected price reductions from some suppliers.
Auto dealers said sales for the past two months have been running fairly steadily above the year-ago rate. Sales of sports cars and luxury models have increased somewhat recently, while sales of trucks and sport utility vehicles have been steady. Most dealers indicated that their inventories have been at appropriate levels, but a few said they have been unable to obtain as many of the more popular vehicles as they could sell.
Finance
Third District bankers interviewed in April indicated that lending was on the increase. Most reported recent gains in business loans booked, especially to middle market firms, and several bankers said applications for commercial loans were still rising. Consumer credit has been flat, according to most of the bankers contacted for this report. Several noted that individuals were consolidating outstanding debt into home equity loans. Banks were also increasing mortgage lending for home purchases, although this has not been reflected in bank balance sheets because many of the new mortgage loans are sold in secondary markets. Bankers said they have been conservative in commercial mortgage lending, but some noted that other types of investors, especially pension funds and insurance companies, had stepped up commitments in the region recently.
Third District bankers generally expect continued growth in demand for commercial loans. They say current and prospective business borrowers anticipate continued moderate growth in sales and are looking to finance the expansion of current operations as well as the start-up of new lines of business. Bankers are less optimistic that consumer lending will accelerate, but they see no signs of a significant retrenchment in borrowing by individuals.
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New York