The current monthly survey of Fifth District business shows little change in business conditions since the previous reporting period. Manufacturers responses suggest little or no change in the level of shipments and further declines in the volume of both new orders and backlogs. As in June, one-third of the manufacturers view current inventories as being above desired levels. Among District retailers, sales appear to have leveled off during the month and most respondents report a continued weakness in sales of big ticket items. The sustained decline in residential construction is leaving its mark on the District's large furniture industry, where orders are reported to be off 20 percent from a year ago. Fifth District commercial banks surveyed report continued strong demand for business credit and increasing selectivity with regard to extensions of credit. In the agricultural sector, cash farm income remains well ahead of a year ago, but the rate of increase is slowing.

For the fifth consecutive month, more manufacturers have reported declines in new orders than have reported increases. Seventeen of 53 firms reporting indicate further accumulation of finished goods inventories while 15 of 55 report increases in raw materials inventories. Additionally, there are significantly fewer comments concerning materials shortages. The emphasis seems to have shifted to prices, with 48 of 55 respondents reporting increases in prices paid. An additional point of obvious concern continues to be the prevailing level of interest rates. One manufacturer reports that customers are "substituting dollar limitations for unit limitations on inventories."

Despite some current difficulties and weaknesses, District manufacturers remain moderately optimistic. Eighteen of 54 feel that current inventory levels are too high, but 17 regard current plant and equipment capacity as inadequate and none feels that current expansion plans should be cut back. The respondents are fairly evenly divided on their expectations for the national and local economies, but 19 of 54 expect their own businesses to improve over the next six months.

The electric utility industry may be one significant exception to the view that current expansion plans are no more than adequate. Citing a slower growth in customer demand and investor unwillingness to provide needed capital, one major electric utility company has announced a 31 percent cutback in expansion plans for the three-year period ending in 1976. One other utility firm has announced delays in plant openings and is considering postponement of several planned construction projects. The reasons given in this case are the same, but with the addition of environmental factors. At least one other firm in the industry reports undertaking a review which might result in reductions of its own expansion plans.

The retailers surveyed were evenly divided as to the performance of sales. A majority reported a decline in the sale of big ticket items relative to total sales. There was also some apparent increase in inventories and half of the respondents now feel that inventory levels are too high. The retailers were unanimous in indicating upward movements in both prices paid and prices received during the month of June. None of the respondents in this category feels any need to alter the number or size of outlets, and most expect that there will be little change in business conditions over the next six months.

In the banking field, Fifth District banks report a continuation of strong demand for business credit, and a majority of those surveyed have already announced an increase in the prime lending rate to 12 percent. In view of the strong demand, banks are becoming increasingly selective with regard to credit extensions. One bank indicated having difficulty allocating limited credit among many qualified applicants. On the other hand, these banks generally indicate that demand for consumer credit has remained flat since the beginning of the current year. Meanwhile, growth of demand and time deposits is characterized as disappointing. CD' s are still the major source of funds, but bankers increasingly characterize that market as more competitive. The slow growth of deposits is also affecting the thrift institutions.

Farmland values soared to new record-setting levels during the year ending March 1, 1974. Virginia, West Virginia, and South Carolina were 3 of 12 states in the nation that showed gains of 30 percent or more over a year earlier. Cash farm income continues to run well ahead of a year ago in the District as in the nation, but the rate of increase appears to be slowing. Low prices and spiraling costs of production have brought about a statewide economic squeeze on both poultry and meat producers in Virginia. Many reportedly will be forced out of business if the situation continues much longer.