Results of our most recent survey of businessmen and bankers indicates that business activity in the District is still expanding. Further increases were reported in employment, and retail sales remain strong throughout the District. Manufacturers reported further increases in shipments, new orders and backlogs. District manufacturers continued to be plagued by raw material shortages and tight labor markets. The demand for business and consumer loans increased during the past month while the demand for mortgage loans declined. In general, manufacturing and retailing respondents expect that general business activity, both nationally and locally, will decline during the next six months. Business activity in the District is expected to decline less than nationally, however.

Our list of manufacturing survey respondents has been enlarged and this month's report is based on responses from 56 large manufacturing firms in the District. Survey responses indicate that business activity in the manufacturing sector remains strong. More than 30 percent of those surveyed reported an increase in shipments, new orders and backlogs. Increases were especially prevalent among chemical and machinery and equipment producers. Numerous respondents commented about tight labor markets and shortages of raw materials, especially petrochemical based materials. Complaints about the unfavorable impact of price controls were common. On balance, manufacturing respondents indicated that inventory levels were down compared to the previous month, with the decline in finished goods inventories substantially greater than that of materials. In general manufacturers believed that inventory levels were too low.

Survey responses indicated employment in the District increased during the past month. Increases in the number of employees were reported by 24 percent of the manufacturing respondents. While retailers reported no change in the number of employees, one-third of the banking respondents reported that employment in their areas had increased.

Price increases have been widespread in the District during the past month. More than three-fourths of the manufacturing respondents reported increases in prices paid and one-fourth reported increases in prices received. All of the retailers reported increases in prices paid and three-fourths reported increases in prices received.

Retail sales in the District remain strong. More than one-half of the retail respondents reported that sales had increased in recent weeks. In general, banking respondents indicated that retail sales in their areas had increased. Several retailers commented about the negative impact of price controls on profit margins. Comments by retailers suggest some customer resistance to top-of-the-line items and a higher than normal interest in medium priced and sale items.

The demand for business and consumer loans reportedly increased during the past month while mortgage loan demand declined further. More than three-fourths of the banking respondents reported that the demand for mortgage loans either declined or remained the same.

The shortage of funds continues to be reflected in residential construction. More than 90 percent of the banking respondents indicated that residential construction in their areas had declined. Nonresidential construction activity in the District appears to have changed very little since the previous survey.

District farmers continue to benefit from a greatly improved farm income situation, with cash receipts from farm marketings during January-August running 24 percent above a year ago.

In general, manufacturing and retailing respondents expect the level of business activity, both nationally and locally, to decline during the next six months. But both groups expect production and sales in their own firms to increase during the next six months.