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December 1, 2004
Federal Reserve Districts
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Business conditions in the Third District improved moderately in November. Manufacturers reported increases in orders and shipments during the month. Retailers indicated that sales of general merchandise rose in November compared with October and with November of last year. Auto sales have been steady in recent weeks. Banks and other lending institutions reported that overall lending continued on an upward trend, although some noted that residential mortgage refinancing activity had decreased. Sales of new and existing homes have been steady. Commercial real estate vacancy rates have shown little change, but rents continued to decline. Contacts in the Third District business community generally expect economic activity in the region to expand at its current pace through the winter. Manufacturers anticipate increases in shipments and orders during the next six months. Retailers expect sales for the Christmas shopping season this year to exceed last year's by a moderate amount. Auto dealers expect sales to be level through December. Bankers believe overall lending will remain on the rise, although they anticipate a slowing in growth of residential mortgage activity. Real estate agents and home builders expect home sales to remain close to the current pace. Contacts in commercial real estate expect the demand for office and industrial space to rise gradually during 2005. Manufacturing The region's manufacturers generally expect further gains in business activity. Around six out of ten of the firms surveyed in November expect their shipments and orders to increase during the next six months, and less than one in ten expect decreases. On balance, area manufacturing firms are scheduling increases in capital spending and planning to add employees. Despite mixed reports on current conditions among the region's major manufacturing sectors, the outlook is positive in almost all of them. Third District manufacturers continued to report rising prices, with about the same percentage of firms noting increases during November as in October. Area manufacturers expect further increases in input and output prices during the next six months. They also anticipate sharp increases in the cost of employee health benefits for 2005. Retail Auto dealers in the region reported roughly steady sales in November at around the same rate as in October. Manufacturers have stepped up promotions, and dealers expect that a year-end marketing push will maintain the sales rate close to its current pace through December. Finance Investment companies and stock brokers in the region have been receiving strong cash inflows. Some indicated that growth in business has been steady since midyear, and others said the increase has been recent. In response to the expanded activity, some securities firms are raising staffing levels. Real Estate and Construction Residential real estate agents indicated that sales have been roughly steady in recent weeks. Homebuilders also reported steady sales. Price appreciation continues for existing homes, and builders in many parts of the region have been raising prices for new homes. Real estate agents in some areas said there has been a slight increase in the amount of time houses are on the market before being sold, but most residential real estate contacts indicated that demand continues to be strong. Both builders and real estate agents expect the pace of sales to remain roughly steady. They anticipate rising employment and incomes to cushion the effect of potential increases in mortgage interest rates as long as the upturn in rates does not exceed one or two percentage points.
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