|
Business conditions in the Third District generally improved during February. Manufacturing shipments and orders increased. Retail sales exceeded year-ago and prior month results. Auto sales have also increased. Bank real estate lending moved up slightly, but business and consumer lending has been steady. Sales of both new and existing homes have been rising strongly. Commercial real estate vacancies have been falling and rents have been rising.
Third District business contacts have positive outlooks. Manufacturers expect demand for their products to continue on an upward trend, and they plan to increase employment. Retailers anticipate further growth in sales as the spring season gets under way. Auto dealers expect sales to remain healthy. Home builders forecast construction at or above the current pace into the summer, and real estate agents expect sales of existing homes to remain strong. Commercial real estate contacts anticipate a balanced market and a steady pace of construction for the rest of the year.
Manufacturing
Third District manufacturing activity increased in February, according to industrial firms in the region. One-third of the companies contacted said shipments and orders during February exceeded January levels, although about half said business was steady. Increases were reported from most major industrial sectors in the District. Producers of lumber and machinery had relatively strong gains; in contrast, makers of food products and textiles indicated that demand for their products had slipped. Overall, order backlogs at area plants remained steady in February and inventories edged down; however, some firms in textile industries indicated that inventories were too high relative to sales.
Manufacturers in the District generally expect business to increase during the next six months. They forecast increases in orders and output, and they plan to add workers and lengthen the workweek. On balance, area manufacturers expect prices of both inputs and products sold to rise only modestly.
Retail
Retailers in the region indicated that sales increased by a substantial amount in February from January and from a year ago. Several merchants noted that a significant portion of February sales was attributable to clearance of winter merchandise at substantially discounted prices. Nonetheless, store executives said sales of spring goods, especially women's and children's apparel, were healthy. If the current trend continues, merchants expect sales in March of this year to exceed sales in March of last year. Store officials generally described inventories as satisfactory, as reduced prices have helped clear out winter goods and consumers have started buying spring merchandise.
Sales of new motor vehicles have been on the rise. Dealers reported that manufacturers' shipments of popular models have increased recently, facilitating a better sales rate with less use of incentives. Dealers expect sales to remain at a strong pace, even if there is some slippage from the current rate.
Finance
Most of the bankers contacted for this report said loan volume was steady during February. Although a few indicated that they were increasing business loans slightly, mainly to firms that were purchasing equipment or expanding facilities, most bank lending officers described commercial and industrial loan demand as flat. Bankers also said there has been virtually no growth in consumer lending. Real estate lending activity has been high in the region, but net growth in real estate loans outstanding has been slight. Much of the new mortgage loans booked replace mortgages paid off, and refinancings do not boost total real estate credit outstanding.
Real Estate and Construction
Commercial real estate markets remain healthy, according to recent reports from brokers and property managers. The estimated vacancy rate for the central business district of Philadelphia was 14 percent, unchanged from the fall of last year. Vacancy rates in suburban markets have been declining and are currently estimated in a range of 6 to 12 percent, depending on location. Rents have risen up to 10 percent from a year ago in both the suburbs and the central business district. Demand for industrial space remains strong, but a steady supply of new buildings has kept vacancy rates steady. Rental rates, however, have moved up, reflecting an increasing need for more technologically advanced buildings. Commercial real estate contacts forecast continued construction of build-to-suit office and industrial buildings in markets outside central Philadelphia and some limited speculative construction in a few areas. They expect supply and demand to remain nearly in balance through 1999.
Home builders and residential real estate agents reported a very brisk sales pace in February. Brokers estimate price appreciation of existing homes at around 3 percent over the past 12 months for most parts of the region, but gains have been higher in a few places. Mild weather accounts for some of the strength in February sales, according to builders and real estate agents, but they also cite buoyant consumer confidence and healthy personal income in the region as factors that should underpin a continuing high rate of sales.
|
New York