According to businessmen and bankers responding to our most recent survey, the Fifth District economy continued its upward momentum during the past month. Retail sales were reported to be considerably above year-ago levels. Manufacturers' shipments, new orders, and backlogs continued to expand. Demand for credit continued to grow, with the demand for consumer loans being especially strong. Construction activity was reported to be at high levels despite substantial increases in building costs in recent weeks. Generally, businessmen and bankers are confident that the economic outlook for the District is favorable.

Reports of continued strength in the manufacturing sector were almost universal in this month's survey. Shipments, new orders, and backlogs were reported to have increased substantially. Except in hosiery lines, textile production and sales remained strong; a short supply of synthetic fibers is causing some problems for the industry. Foreign investment appears to be increasing significantly in the District, most notably in the Carolinas. Several foreign firms have recently started manufacturing operations in the Carolinas or announced their intention to do so.

While inventories reportedly declined further in the past month, most respondents believe that inventories are at appropriate levels. Some retailers reported recent upward adjustments in inventory levels to bring them in line with increased sales expectations. A number of manufacturing firms indicate that current plant and equipment capacity is at lower than desired levels.

Manufacturers reported that employment was unchanged from recent high levels and that hours worked per week had increased slightly since the last survey. A sizable number of banking respondents reported increases in employment in their areas. As in the past several surveys, a shortage of labor was the most common problem mentioned by respondents. Insured unemployment rates are reported to be less than 1 percent in some areas, and numerous firms are said to be advertising heavily in an attempt to attract workers. Numerous firms reported increases in both wages and prices received since our last survey. Several respondents cited sharp increases in building costs in recent weeks.

The retail sales picture in the District remains very favorable. Several major retailers reported that sales are considerably higher than year-ago levels, with sales of women's apparel being especially strong. Generally, retailers appear to be optimistic about the outlook for the spring season.

Demand for all types of loans remains strong in the District. Demand for consumer loans is apparently stronger than the demand for business and mortgage loans. One large bank reported that February was the best month that his bank had ever had for consumer loans. This was attributable, in part, to favorable weather conditions. Both residential and nonresidential construction activity increased in the last month.

In the District farm sector, realized gross and net income per farm reached record levels in 1972. Average net income in the District amounted to $4,069 per farm, 19 percent above a year earlier.

District businessmen and bankers remain confident about the general economic outlook. Nearly two thirds of the banking respondents expect improvement in business activity in their areas in the next two or three months.