Business activity in the Third District continues to cool, and the six-month outlook reflects a continuation of the slowdown. Seven out of ten executives surveyed report no change in business activity in March, and one in three expects decreases by September. Employment levels are continuing to hold up in the region, and area manufacturers see little change in employment or in the average length of the workweek by fall. Inventory investment will remain stable into fall, but by September two in five firms expect to increase spending on plant and equipment goods. February was disappointing for area retailers, but March looks more favorable. Prices continue to escalate, and no relief is expected during the next six months. Area bankers report decreasing loan demand and weak deposit flows.

According to this month's business outlook survey of manufacturers in the Third District, industrial activity in the area is continuing to slow down. More than half the firms report no change in new orders, shipments, unfilled orders, and delivery times in March. And area manufacturers expect business activity to continue to level off in the next six months. Those executives expecting increases in new orders by early fall just about equal those expecting decreases, with two in five respondents reporting no change expected.

At the present time, the slowing in business activity is having very slight effects on employment in the District. Over three quarters of the respondents report no change in their number of employees and the length of their average workweek. And, the employment picture is not expected to alter much in the next six months. Seven out of ten executives expect to maintain stable employment levels into early fall, and eight out of ten expect to keep the length of the average workweek the same.

Half the manufacturers report no change in inventory levels this month, and four out of five expect no change or decreases in inventory stocks by September. While half of the respondents report no change in plans for capital expenditures in the next six months, 40 percent expect to boost spending on plant and equipment, an increase of 12 percent from last month.

Retailers here experienced declines in sales in February, after a pretty good month in January. Heavy snows and a gas station strike combined to pull down the level of sales in February. Although still cautious in their spending plans, area retailers are forecasting a better month in March.

Not a single firm surveyed reported a decrease in the prices it pays or the prices it receives, and nine out of ten reported paying higher prices in February. Six months from now, over 80 percent of the firms expect to pay higher prices for raw materials and to receive higher prices for finished goods.

In general, financial conditions in the Third District remain tight. Loan demand is off more in our area than in the nation as a whole. Bankers report the demand for short-term business loans is soft. Demand deposit flows are also weak and are not expected to increase in March. Most banks surveyed are stepping up plans to attract new deposits. Buyers are decreasing their demand for short-term certificates of deposit and increasing their demands for longer term ones. As expectations of lower rates continue to mount, banks are unwilling to commit themselves to the longer term CDs.