Business activity in the Third District continues to slow and the six-month outlook reflects a continued cooling in the regional economy. One in three of the firms contacted report a decrease in the general level of current business activity and half expect decreases by August. Employment levels continue to hold up in area manufacturing firms, but executives see this changing by next summer. Investment in inventories is decreasing in one in five firms and expectations for spending on plant and equipment are softening, In contrast, area retailers report good sales volume in January but have reservations regarding the coming months. The truckers' strike could seriously affect food supplies if it continues through the next several weeks. Prices are continuing to spiral with little relief forecast for the next six months at least. Area bankers report loan demand easing and a decline in demand deposit flows.

Manufacturers in the Third District responding to this month's business outlook survey report a continued downtrend in the general level of business activity. More than half the firms anticipate no change in their new orders, shipments, unfilled orders, and delivery times. But one in five firms see declines rather than advances in these key indicators, an increase from last month's survey. And, area manufacturers remain cautious about the six-month outlook. Three out of four executives anticipate no change or decreases in new orders, shipments, and unfilled orders in the next six months.

Most area manufacturers continue to maintain stable employment levels. Four out of five executives see no change in the size of their work force in February. However, more firms are continuing to cut back the work week. And by next summer, one-third expect a shorter work week and fewer employees on the payroll. More executives report decreasing their inventories this month than last month, and relatively few expect to increase them over the next six months. Area manufacturers will continue to be cautious in their planning, with two-thirds forecasting no change or a decrease in investment in plant and equipment by August.

Contrary to expectations, most area retailers report a favorable January sales volume. Many stores were disappointed with initial Christmas sales and expected a similar downtrend in January. But, sales held strong or even increased last month. However, retailers remain cautious in their outlook for the next two quarters.

The Third District could be greatly affected by the recent independent truckers' strike. A survey of retail food chains, however, did find most stores' inventories holding up well. Retailers have been able to utilize alternative sources and rail transportation. However, most executives surveyed forecast they can hold out only one more week before large shortages of produce and meat develop.

Prices continue to escalate in the Third District. Almost nine out of ten businessmen are paying higher prices for raw materials in February than they paid in January. Even more respondents expect this trend to continue six months out.

Area bankers report a slackening in loan demand and expect the trend to continue through the first quarter. Demand deposits are also down for this time of year, but time deposits are holding steady.

With the drop in rates, most banks are decreasing their demand for CD's and increasing their demand for the shorter term Federal funds. Surprisingly, however, one bank's demand for CD's is still strong.