|
Business conditions in the Third District improved in December. Manufacturers reported increases in orders and shipments compared with November. Retail sales of general merchandise for the Christmas shopping season posted solid increases compared with a year ago. Banks reported modest growth in lending, and investment companies reported continuing increases in activity. Companies in a variety of service industries gave generally positive reports, although most indicated that their business was expanding only slightly.
The consensus outlook in the Third District business community is for continued improvement in 2004. Manufacturers forecast increases in shipments and orders. Most of the retailers surveyed in December expect sales to move upward steadily in the new year. Auto dealers expect sales in 2004 to match, and perhaps slightly exceed, sales in 2003. Bankers expect modest increases in lending during the year. Service companies anticipate moderate growth.
Manufacturing
Third District manufacturers reported continuing gains in activity in December. Half of the firms polled during the month indicated that orders had increased compared with November while less than one in 10 noted decreases. Shipments increased at just under half of the firms and declined at only a very few. Although most firms said their order backlogs were steady, almost one out of five reported that their backlogs were growing. Order backlogs at area plants have been moving up at a modest, steady rate for the past several months. Business conditions were relatively stronger for firms producing industrial materials, transportation equipment, and metal products. Conditions have softened for makers of lumber products, after a relatively long period of strong activity, and for firms making a variety of paper products. While most of the firms surveyed in December reported steady employment and working hours, the number adding employees or extending hours increased noticeably during the month compared with prior months this year.
The region's manufacturers forecast continued improvement. Somewhat more than half of the firms contacted for this report expect increases in shipments and orders during the first half of 2004, and less than one out of 10 expect decreases. On balance, area manufacturing firms plan to add workers and extend work hours during the first half of 2004, and they plan to increase capital spending as well.
Retail
Third District retailers generally reported that sales for the Christmas shopping period met or slightly exceeded their expectations. On average, current dollar sales of general merchandise were up around 5 percent, with some stores reporting slightly smaller gains and a few reporting higher increases. Much of the season's sales came in the week before and after Christmas. Sales performance varied by type of merchandise. Sales of consumer electronics and home furnishings were relatively strong, but sales of apparel and jewelry were relatively weaker. Several merchants noted that more shoppers purchased higher-priced merchandise this year compared with last year, but there seemed to be less impulse buying. Store executives said price markdowns this year were about in line with past years and, in general, they were not left with excessive post-Christmas inventories. Looking ahead, most of the retailers surveyed in December expect steady sales growth in 2004 at a moderate rate.
Auto dealers reported a seasonal slowing in December that has left some with high inventories. Nevertheless, most are optimistic that sales in 2004 will at least match sales in 2003. They expect manufacturers to offer incentives as needed to keep the sales rate from slowing.
Finance
Third District banks contacted for this report generally indicated that loan volumes outstanding were increasing modestly. Business and real estate lending were on the rise at most of the banks surveyed. Most banks also reported growth in consumer lending, but the extent of the gains varied; some banks were posting fairly strong increases, but some said consumer loans were barely moving up. In general, banks indicated that credit quality has been stable. However, some noted increases in defaults on personal loans. Some banks also reported that they are reexamining the financial conditions of a number of their business borrowers, although most banks said commercial credit quality has been steady.
Bankers in the District expect moderate growth in lending to continue in 2004. They report growing optimism among their commercial borrowers, although they expect only modest increases in business activity and financing needs at firms in the region. Bankers also expect some gains in consumer lending and residential mortgage lending during the year.
Investment companies in the District have seen stepped up activity in the past few months. Inflows to equity funds have increased markedly while inflows into bond funds have been steady. Mutual funds and stock brokerages expect growth in activity in 2004, although they anticipate increases in costs if new regulations on trading activity are imposed.
Services
Service firms contacted in December generally reported slight strengthening in growth compared with prior months. Demand for general business services has edged up, and firms involved in various marketing functions also noted some recent improvement after a prolonged slow period. Information technology service companies also reported some stronger growth, with much of their new business related to systems integration and network security needs. Employment agencies indicated that both seasonal and fundamental demand for temporary workers has picked up. Reports on permanent hiring were mixed. On balance, the pace of hiring was just edging up, with relatively stronger demand for employees in the service, finance, and transportation industries. Looking ahead, most service companies expect moderate growth in 2004, with some building of momentum as the year progresses.
|
New York