General business conditions remain favorable in the Third District. Production activity is maintaining strength and is expected to keep on its present upward course. Employment opportunities are holding fairly steady this month but. are expected to increase as production continues to rise. Inventory investment is stable at present levels, while increases in capital expenditures are planned at many firms. Bankers cite rapid growth of consumer loans as a bright spot in otherwise flat loan demand. Deposit levels remain unchanged at most banks. On the dark side, however, inflationary expectations remain high.

Continued strength is evident in production activity. Forty-seven percent of the respondents to this month's Business Outlook Survey of Manufacturers in the Third District report increases in their sales; 59 percent report increased shipments. Only a small minority of the local manufacturers are currently experiencing production cutbacks. On the six-month horizon,. the increases are expected to continue, with over 40 percent of the respondents anticipating both increased sales and shipments. Employment in the Third District is generally holding steady. Over 70 percent of the firms surveyed report no change in their number of employees, and almost 80 percent said that their average workweek had not changed. Looking ahead, anticipated production increases in the months ahead are prompting a small but increasing minority of firms to plan increases in the average workweek.

Capital expenditures plans remain steady at last month's reported high level; over 40 percent of the firms contacted expect to increase outlays. No respondents intended to cut back plant and equipment spending. Half of the area respondents are holding current inventory investment levels constant and anticipate no changes in the coming months. The remaining businessmen are equally divided between increasing and decreasing inventory for both the current month and six months from now.

Upward price pressures continue high, with virtually no relief expected by local businesses. Over two-thirds of the respondent firms cite increased raw materials costs. The majority reported no change from last month in the prices they charge. But during the next six months, over 65 percent of the firms contacted fear rises in both the prices they pay and prices they charge.

Area bankers report that overall loan demand continues near the same levels as in past months. Consumer loans are mentioned as the fastest growing category in the past month by several Philadelphia banks. Business loans and real estate loans are flat at the banks which were contacted. But business loan demand for plant and equipment spending is expected to increase in future months according to several bankers. Deposits at most banks are about flat. Checking accounts, low interest savings accounts, and other deposit categories which are not sensitive to interest rates are reported holding steady at most banks. But time deposits paying Regulation Q interest ceilings are being closed out to purchase U. S. Government bonds at some places. One banker said this disintermediation is not yet a real problem because loan demand is currently steady. However, he said strong loan demand would tighten credit rapidly and cause a credit crunch.