Responses to our latest survey of business conditions indicate that sluggishness and uncertainty continue to characterize the Fifth District economy. In manufacturing, shipments remain steady while new orders show continued weakness and order backlogs continue to decline. Inventories of finished goods apparently rose further during August, but growth of materials inventories appears to have leveled off. There remains, however, a general feeling that current inventory levels are excessive. Increasing pessimism is indicated by responses concerning expectations for business activity over the next six months, although most respondents anticipate, at worst, no change in production levels within their own firms over that period. Among retailers surveyed, sales continue to hold up reasonably well, although big ticket items continue to move slowly. The latest survey of District banks suggests a persisting strong loan demand, especially in the business sector, with banks becoming progressively more selective in their loan policies. In the agricultural sector, crop conditions in many areas have improved somewhat as a result of rains since the first of August. Complaints of the depressing effects of tight money and high interest rates are widespread throughout the District.

The August survey of business conditions shows little or no abatement of the slowing trend which has characterized much of 1974. At no time this year has the survey suggested an increase in the volume of new orders, and the latest survey marks the seventh consecutive decline in this indicator. Shipments showed little change during the month; but as in previous months, production seems to have been buoyed by existing backlogs of orders rather than by new orders. Forty-nine percent of the manufacturers responding to our survey report further declines in backlogs. Despite the relatively stable level of shipments, inventories of finished goods continue to accumulate, with forty-three percent of manufacturing respondents reporting further increases. There are fewer reports of increases in material inventories than in recent months, but in no month this year has a decrease been indicated. Over 50 percent of respondents now feel that inventories exceed desired levels. Manufacturing employment has remained relatively stable during the first eight months of the year, but the average workweek continues in a mild but persistent decline.

Expectations of District businessmen have taken a distinctly pessimistic turn in recent months, and fewer respondents now expect any nationwide improvement than at any time in the past six months. Expectations for local business conditions also remain on the bearish side as almost 45 percent of the manufacturers surveyed expect local business conditions to worsen over the next six months. Expectation patterns among retailers do not differ significantly from those among manufacturers.

In the retail sector, the dollar volume of sales is reported as firm, although sales of big ticket items relative to total sales apparently continue to weaken. Retailers in our survey indicate some further inventory accumulation during August, and increasing numbers view current inventory levels as excessive.

A recent survey of Fifth District bank lending practices suggests a further tightening of credit conditions, continuing a. situation which has persisted for several months now. Additionally, loan demand remains strong, led by demand for commercial and industrial loans. In the face of this continued strong demand and the high marginal cost of loanable funds, financial institutions are applying increasingly strict standards to loan applications, and interest rates and compensating balance requirements are also becoming firmer. Established and local service area commercial customers continue to receive favored treatment on loan requests, while requests from new business customers receive more stringent review. Savings deposits are at the lowest levels since late May, but CD positions have remained stable. Savings and loan associations report continuing losses of deposits.

The District's major public utility corporations continue to announce cutbacks in capital plans. The latest such announcement by a major company involves a two-year delay in the construction of two nuclear power plants, and a $1.5 billion decrease in the company's five-year construction plan. The latter reduction will result in a cut of approximately 1,000 construction jobs. These changes in plans were attributed to rising costs and high interest rates.

In the agricultural sector, crop conditions in many areas of the District have improved as a result of rains since August 1. At that time, production prospects for peanuts, soybeans, and corn were somewhat below last year's record output, and smaller crops of hay, sorghum, grain, and fruit were also indicated. Strong demand and better quality tobacco have combined to produce record breaking flue-cured tobacco prices in recent weeks.