Results of our most recent survey of businessmen and bankers indicate that business conditions in the district continued to improve in the past month. More than 50 percent of the manufacturing respondents reported increases in shipments, backlogs and new orders. Retail sales were reported to have increased substantially. Banking respondents reported a high level of demand for loans, especially consumer and business loans. Construction activity remains at a high level throughout the district. In general, businessmen and bankers are highly optimistic about the economic outlook for the district although the degree of optimism among bankers is somewhat lower than last month.

District manufacturers continue to report rising business activity. More than 50 percent of the manufacturing respondents reported gains in shipments, new orders and backlogs. While gains were fairly widespread, producers of steel and synthetic fibers appear to be experiencing especially robust gains. One large synthetic fiber producer commented on a recent unexpected increase in the world demand for synthetic fibers, which increased the output of his firm. Reports from furniture manufacturers are mixed, although labor shortages continue to plague the producers. All manufacturing concerns producing materials directly related to construction activity are experiencing high levels of demand for their products.

While nearly 60 percent of the manufacturing respondents reported a decline in inventories, most believed that inventories were at appropriate levels. On balance, retail respondents reported increases in inventory levels during the last month. Forty percent of the manufacturing respondents indicated that plant and equipment capacity was lower than they would like it to be given current business conditions.

Manufacturers continue to experience little change in employment and slight increases in hours worked per week. More than one-third of the banking respondents reported increases in employment in their area. The tight labor supply situation was mentioned by several banking respondents located in the Carolinas. Wage and price increases were widespread with more than one-third of manufacturing and trade and service respondents reporting increases.

Retail sales are reported to be strong in the district. Two-thirds of the banking respondents reported that retail sales in their area had improved during the past month. All of the retailers responding to this month's survey indicated gains in sales over the previous month. In general, retailers appear to be very optimistic about the outlook for continued increases in sales.

Reports from bankers indicate that loan demand continues strong throughout the district. In particular, the demand for consumer and business loans appears to have gained momentum in recent weeks. Increases in consumer loans were reported by 75 percent of the banking respondents, while 60 percent reported increases in the demand for business loans. Construction continues at a very high level throughout most of the district.

Because of sharply higher farm prices and weather-delayed harvest of many 1972 late season crops, January cash receipts from farm marketings were up 28 percent over a year earlier.

Businessmen and bankers continue to be optimistic about the general economic outlook. While the degree of optimism among banking respondents is down from last month, more than one-half of the banking respondents expect improvement in business activity in their areas in the next two or three months.