March 3, 2010
Federal Reserve Districts
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Economic conditions improved in some sectors in the Third District and have been about steady in others since the last Beige Book. Manufacturers, on balance, reported increases in shipments and new orders. Retailers indicated that a rising sales trend was interrupted by snowstorms in February. Motor vehicle dealers indicated that sales have been increasing slightly but were also hampered by snowstorms. Third District banks reported steady loan volume outstanding. Residential real estate agents and home builders said demand for homes has been on the rise, but February snowstorms adversely impacted construction and sales. Nonresidential real estate leasing, purchase, and construction activity continued to be weak. Service-sector firms generally reported steady activity. Business firms in the region indicated that prices of most goods and services have been steady, although there were reports of price increases for metals and some industrial products.
The outlook among Third District business contacts is that business conditions will improve slowly in most sectors in the months ahead. Manufacturers forecast a rise in shipments and orders during the next six months, on balance. Retailers expect sales to expand slowly as overall economic conditions improve. Auto dealers expect sales this year to be slightly above the level achieved last year. Bankers expect only slight increases in lending. Residential real estate contacts expect home sales to be boosted in the short term by the homebuyer credit, but they expect just a slow increase in sales after the expiration of the tax benefit. Contacts in nonresidential real estate expect leasing to advance as landlords reduce rents, but they expect construction to remain soft through most of the year. Service-sector firms generally anticipate slow growth in the near term.
Third District manufacturers expect business conditions to improve during the next six months, on balance. Among the firms polled in February, about half expect increases in new orders and shipments through the middle of the year; about one-tenth expect decreases. Capital spending plans among area manufacturers have improved since the last Beige Book. About one-third of the firms polled in February plan to increase expenditures for new plant and equipment, although one-half plan to maintain level spending. Despite the general improvement in current and expected conditions in the region's manufacturing sector, some firms said further gains could be limited by continuing tightness in credit markets and adverse developments in regard to taxes and regulations.
Third District auto dealers reported a slight improvement in sales since the last Beige Book, but a negative impact from February snowstorms. Looking ahead, dealers continue to expect total sales for this year to be slightly ahead of last year.
Third District bankers see some signs of loan growth ahead. Some reported increased inquiries about business loans. However, in general, bankers in the region expect consumer loan demand to remain soft, and they expect tight credit standards to limit expansion in lending of all types.
Real Estate and Construction
Nonresidential real estate firms indicated that leasing, purchase, and construction activity remained slow, but there have been some slight increases in the sales of commercial buildings in some parts of the region. Contacts reported that vacancy rates have been about steady since the last Beige Book report, but effective rents have continued to decline. Much of the recent leasing activity has been for relatively small blocks of office space, according to agents, who say that tenants are reluctant to commit for large blocks of office space. Contacts reported a slight increase in leasing of industrial space, but they said the demand for retail space has remained weak. Contacts expect nonresidential real estate markets to remain soft through at least mid-2010, by which time improvement is expected in some, but not all markets. A contact in office markets said that "significantly reduced rental rates will be influential" in stimulating leasing activity in office markets, but a contact in industrial markets said that sector will be "tested" in 2010.