Our most recent survey of District businessmen indicates that economic conditions in the Fifth Federal Reserve District continue to improve. Manufacturers report increases in shipments, new orders, and backlogs. No change was reported in manufacturing employment, but there was an increase in hours worked per week. The demand for all types of loans remains strong, with consumer loan demand especially strong. Further increases in construction activity were reported. Businessmen and bankers continue to be optimistic about the Fifth District economy.

Responses from District manufacturers indicate increases in shipments, volume of new orders, and backlogs. On balance, manufacturing inventory levels were reported to have decreased, although inventories relative to desired levels remain high. There are indications that production is beginning to press on capacity in some industries as an increased number of manufacturers report that current plant and equipment capacity relative to desired capacity is too low.

A strong upward trend in retail sales continues to be reflected in reports from bankers and trade and services respondents. Increases in retail sales excluding automobiles and in automobile sales were reported by more than three-fourths of the banking respondents.

Manufacturers reported no change in employment, while hours worked per week increased somewhat. Industry reports indicate pronounced shortages of labor and growing overtime in the important furniture industry. Trade and service respondents indicated an increase in both employment and hours worked per week. On balance, both manufacturing and trade and service respondents reported an increase in wages paid, but no change in prices received.

According to reports from District bankers, residential and nonresidential construction activity continues strong. Nearly one-half of the banking respondents indicated that construction activity has increased in their areas since the last reporting period.

Bankers report strong demand for all types of loans. The demand for consumer loans appears to be especially strong with more than 70 percent of the banking respondents indicating an increase in the demand for this type of loan.

District crop conditions improved slightly during August, but production prospects in early September were generally below those a year ago. Output of only three of the chief money crops—peanuts, soybeans, and corn—is expected to be sizably larger than in 1971. January-July cash receipts from farm marketings were 5 percent above a year ago, but the increase was below the national gain. Demand remains strong, and record breaking prices for better quality grades continue to prevail on flue-cured tobacco markets.

Businessmen and bankers in the District continue to be optimistic about the economic outlook. More than three-fourths of the banking respondents believe that business activity in their areas will increase in the next 90 days.