The September survey of Fifth District businesses reveals a continued slowing in most sectors of the District economy, with the manufacturing sector showing the greatest decline. This decline seems to be centered in a few industries, but they are industries which contribute significantly to the Fifth District economy, including the textile and furniture industries. Construction, particularly residential construction, continues in a slump, and the effects are beginning to ripple throughout the District economy, impacting on employment and production in several important industries. New orders declined almost across the manufacturing sector, while inventories of finished goods continued to accumulate. The six months expectations of manufacturing firms turned decidedly pessimistic. In the banking sector, reduced demand and restrictive bank lending policies have slowed the growth of business loans relative to the first half of the year. The personal savings situation shows continued weakness.

Survey responses from the manufacturing sector indicate broad and, in many areas, steep declines in the level of activity. Some decline in shipments was indicated, but a more accurate assessment of the trend might be based on the volume of new orders and the backlog of orders. Thirty-seven percent of the manufacturing respondents indicated declines in shipments while only 28 percent indicated increases. On the other hand, 58 percent reported a decrease in the volume of new orders and 51 percent reported a reduced backlog of orders. The last six months have shown a consistent, or perhaps accelerating, decline in new orders while the volume of shipments has generally remained firm. September represents only the, second month since March in which shipments, orders, and backlogs each showed a general weakness. Additionally, there was some further inventory accumulation in the finished goods area. Forty-eight percent of the manufacturers surveyed now feel inventory levels are excessive. More than twice as many manufacturers reported reductions than reported increases in the number of hours worked per week.

Although there are indications of a general weakening in the District economy, a review of the individual industries represented in the survey shows a few large industries are greatly influencing the overall picture. In the textile industry, shipments, orders, and backlogs were all off sharply, inventory levels were considered excessive and expectations were generally pessimistic. During September, there were scattered reports of textile firms slowing or ceasing production. Recent announcements include one-week closings of six plants by one firm and the dropping of a product line by another.

Similar conditions are reported by survey respondents in the furniture and fixtures industry where shipments, orders, and backlogs were down sharply and current inventory levels are considered excessive. Expectations among furniture manufacturers surveyed were decidedly negative, with one respondent feeling there is "no improvement in sight." Conditions in the furniture and fixtures industry are, of course, closely related to conditions in the depressed residential construction industry. Various reports show continuing decline. in building permits issued and high and rising unemployment among residential construction workers. Cutbacks in other industries are also being tied to the current housing market. For the second consecutive month, a major sheet glass producer has closed a production facility in the Fifth District. The lumber and wood products industry reports conditions very similar to those reported by the textile and furniture industries.

Several factors, such as rising prices, tight credit conditions, and delays in obtaining materials, are having a depressing effect on the expectations of those manufacturers surveyed. Sixty-five percent now expect national business conditions to worsen over the next six months and almost as many, 58 percent, foresee a similar decline in their respective market areas. Perhaps more indicative of the general mood, the number expecting their own level of production to decrease now exceeds the number expecting it to increase over that period.

Retailers responding to the September survey present a somewhat more optimistic picture, although the responses are difficult to interpret. Sales are generally reported to be increasing but it is not clear whether this indicates a real increase or merely increases in dollar volume. Sales of big ticket items relative to total sales continued to decline during September. There is some indication that inventories are accumulating beyond desired levels although this condition may not yet be widespread.

In the banking sector, the efforts of banks to restrict business loan activity are having some impact as aggregate business loan expansion slowed relative to the first half of the year. There are also some indications that business loan demand is slowing as well. Commercial and industrial loans outstanding at District weekly reporting banks have shown essentially no growth over the past four months. Consumer savings deposits at commercial banks remain weak, having declined through September. Final July data for S&L deposit activity in the Fifth District (excluding West Virginia) shows a net decline in savings of $49.8 million. Preliminary data for August indicate a net savings drop of $77.2 million.

Realized net farm income rose an unprecedented 68 percent in 1973. But District bank agricultural specialists, in a recent opinion survey, indicated a belief that net farm income will decline this year because soaring farm production costs will more than offset the slight gain in gross farm income.