The economic expansion continues to move ahead in the Third District but there are some indications that the advance may be slowing. Manufacturing activity increased again this month and employment is up slightly as well. Plant and equipment spending plans are bullish. Loan demand at banks is strong. On the darker side, inventory investment has leveled off and retail sales are lackluster. Finally, inflationary price changes are widespread. Third District manufacturers polled in this month's business outlook survey report their output is increasing less rapidly. The large majority of responding firms report no change in their new orders, shipments, unfilled orders, and delivery times. However, for the minority of firms reporting changes in these categories, there are still more reporting increases than decreases. The six-month outlook is less bullish. Although the majority of firms contacted expect no change in business activity during the six months ahead, the minority expecting change includes more firms expecting decreases than increases.

The continued high level of business activity is reflected in a slight increase in employment. More than twice as many firms report increasing the number of people on their payrolls and the length of the average workweek than are reporting decreases. However, over 85 percent report no change in their current labor usage. During the coming six months, however, the level of employment is expected to remain flat. The number of firms expecting to hire approximately equals the number that foresee layoffs. A slight reduction in the length of the average workweek is also expected by next spring.

The continued high level of current business activity is causing a sizable number of businessmen to increase their plant and equipment spending. Although half the respondents have no plans to change their capital expenditures, one-third plan increases. Inventory investment is less bullish. The respondents' consensus indicates that current inventories are holding constant, but small inventory reductions are expected during the next six months.

Retail sales are slowing according to executives in Philadelphia department stores. Durable goods purchases of the postponable variety, such as appliances, are off significantly. However, the retailers contacted expect good Christmas sales.

Upward pressure on prices is still strong with over two-thirds of the respondents reporting paying higher prices during the past month. On the other hand, two-thirds of the firms report no change in the prices they charged during the past months. Looking ahead to next summer, however, over 80 percent of the respondents expect higher prices both for the goods they buy and sell.

City and regional bankers report that checking and saving deposits are maintaining the same slow levels of growth as in past months. Dependence of large CDs as a source of funds has weakened as bankers are now returning to the Federal funds market for shorter term funds. Loan demand is strong, especially business, real estate and consumer loans, while loans to non-bank financial intermediaries decreased a little.