June 13, 1973
Results of our most recent survey of businessmen and bankers indicate that the Fifth District economy remains in a strong advance, with the manufacturing sector continuing to gain momentum. Further increases in manufacturers’ shipments, new orders and backlogs are reported, while manufacturers’ inventories have apparently declined further in recent weeks. It now appears that for a significant number of manufacturers, inventory levels are lower than desired. Increases in retail sales evident in recent months are continuing while construction outlays apparently remain on the rise. According to a special survey, the mortgage markets have tightened significantly in recent weeks.
Increases in shipments, new orders and backlogs were reported by more than 50 percent of the manufacturing respondents in the latest survey. Among the manufacturers reporting gains were producers of synthetic fibers, chemicals, and steel. Nearly one-half of the manufacturing respondents reported declines in inventories, while one-fifth indicated that inventory levels are too low relative to sales prospects. Nearly one-third of the manufacturing respondents reported that current plant and equipment capacity is inadequate.
The number of manufacturing firms reporting increases in employment rose sharply and manufacturers on balance also reported an increase in hours worked per week. Trade and services respondents indicated little change in employment and hours worked per week. Widespread wage and price increases were reported by both manufacturing and trade and services respondents.
Retail sales in the District remain strong. All retail respondents reported sales increases and more than one-half of the banking respondents indicated that retail sales in their areas had risen further in recent weeks.
Banking respondents report that the demand for all types of loans continues strong. Increases in the demand for business, consumer and mortgage loans were reported by more than 60 percent of all banking respondents. Bankers also indicate that both residential and nonresidential construction activity increased in their areas during the past month. Some overbuilding of residential apartments is reported in parts of the Carolinas. Contacts with several major builders in the District suggest that the proposed changes in real estate tax shelters have not had any noticeable impact on construction activity.
A recent survey of residential mortgage lenders in the Fifth District indicates that mortgage markets have tightened in recent weeks. This tightening is associated with a slowdown of deposit inflows at savings and loan associations and savings banks which, in turn, is attributed to increased consumer spending and rising market rates of interest. Also contributing to the tighter conditions is the large volume of loans to which these institutions have committed themselves in recent months. Very few funds are available for new loans, while rates to preferred customers are in the 8 percent range. The Washington, D.C. area appears to be experiencing the tightest conditions, while Baltimore has some institutions (savings banks) that are still making new loans. Other major Fifth District cities seem to fall between these two extremes.
The significantly improved farm income situation continued throughout the first quarter of 1973, with cash receipts from farm marketing recording a 26 percent increase over a year ago. While spring plantings in the District are about on schedule, recent sharp increases in the price of feed are of major concern to livestock producers and may be having adverse effects on poultry and hog production.
On balance, businessmen and bankers in the Fifth District continue to be optimistic about the general economic outlook. All of the banking respondents expect business activity in their areas to stabilize at present levels or to advance further during the next three months.