The overall assessment of business activity in the Third District is essentially one of "no changes" from last month. Signs are beginning to appear suggesting that current business expansion is losing some of its vigor, but the outlook is still basically positive. Manufacturing activity is continuing undiminished. Employment is still gaining slightly. Inventory investment continues upward, but capital outlay expectations have leveled off. Bankers report tightening credit conditions. Prices are currently frozen but are expected to rise in the future.

Manufacturing activity in the Third District maintained last month's high level according to this Bank's July Business Outlook Survey. Most firms report no change in their new orders, shipments, unfilled orders, and delivery times this month; and they expect little change in the future. For the six-month outlook, manufacturers are slightly optimistic with predictions of advance in orders and sales outnumbering predictions of declines by a 6 to 5 ratio.

The District is experiencing modest but continuing gains in employment. Less than 5 percent of the manufacturers surveyed report cutbacks in their payrolls and work hours, while 10 percent are taking on additional employees. By early 1974, 16 percent of those surveyed plan hiring increases, but another 16 percent foresee layoffs. So, the longer-run employment outlook seems to have leveled off.

Inventory investment is still headed upward. Thirty-one percent of the responding firms indicate increased stocks over last month. Looking six months into the future, however, further inventory increases were not revealed by the survey. The majority of firms report unchanged or increased capital expenditures within six months but the minority predicting decreases has doubled from last month.

Area bankers report tightening credit markets. Loan applications from new business customers and some old customers who deserve loans are being denied. Demand for mortgage credit exceeds most banks' willingness to make mortgage loans at the current low ceilings. Demand for consumer loans continues to grow. However deposits are not growing at most banks. Several banks report that the velocity of their demand deposits is skyrocketing while demand deposits grow very slowly. Disintermediation is a problem at all the banks contacted except one which just started giving free checking account service if more than $200 is kept in savings. The bankers report that interest rates on CD's are very high but they can still be sold fairly easily; no credit crunch atmosphere exists. The area bankers contacted report that the effect of the higher interest rate ceilings cannot be determined yet.

Prices are reported frozen stable at June levels by every firm contacted. But, inflation continues to loom as a problem for the beginning months of 1974 although manufacturers unanimously indicated that they are presently holding the line on price increases. Well over half of the respondents fear that both their costs and the prices they charge will be higher by January.