The October survey of Fifth District businesses indicates a further deterioration of business conditions, with a few key industries leading the decline. General weakness in the construction industry seems to be having a depressing effect on both the textile and furniture industries, two of the District's leading manufacturing activities. Manufacturers in general report fewer instances of higher prices, particularly with respect to prices received. While retailers in the survey continue to indicate growth in the dollar volume of sales, big-ticket items continue to move slowly. Activity at Fifth District financial institutions during October seems to reflect the general slowdown in the nonfinancial sector of the economy. Outstanding CD's at weekly reporting banks are declining, and a growing number of banking respondents indicate that general pressures for credit expansion are easing.

Over 75 percent of the manufacturers surveyed reported declines in the volume of new orders in October. Similarly, the diffusion of responses suggests a decided weakness in both the volume of shipments and the level of backlogs. This worsening in the orders picture represents the continuation of a trend that began late last spring. Our latest survey also shows declines in both the number of manufacturing employees and in hours worked per week. Despite this evidence of reduced output, almost half the manufacturing respondents report further accumulation of finished goods inventories and almost 45 percent view current inventory levels as excessive. More than a third see current plant and equipment capacity as excessive, and 16 percent feel current expansion plans should be cut back. Over 75 percent now feel that the level of business activity nationally will worsen over the next six months, and over 50 percent see the level of production in their own firms declining. Such attitudes represent a significant departure from those expressed in recent surveys.

As in previous months, the business slowdown seems to be having the greatest impact on a few key industries. The most negative responses come from the textile industry. Of 12 textile firms responding to the survey, 11 report declines in shipments, while all 12 report declines in new orders and in backlogs. Additionally, reports of layoffs and plant closings within the industry are becoming more frequent. Unemployment is rising rapidly throughout the industry, and most reporters expect conditions to worsen during the next six months. Respondents from the furniture industry indicated similar conditions, although they are maintaining the level of shipments by further reducing backlogs. Three-fifths of the furniture manufacturers surveyed feel current inventory levels are excessive and that conditions will continue to deteriorate during the next six months.

Retailers in the survey report further increases in sales but a continued decline in the sale of big-ticket items relative to total sales. In addition, there seems to have been some further accumulation of retail inventories during October, and 44 percent of the retail respondents now feel current inventories are excessive. Retailers are unanimous in reporting higher prices paid and received. Most foresee little change in business conditions during the next six months.

Activity at Fifth District financial institutions during October seems to reflect the general slowdown in the nonfinancial sector of the economy. Total loans of District member banks (seasonally adjusted) were up $379 million from the previous month but still below the July peak. Commercial and industrial loans at weekly reporting banks rose from September to October, while real estate and consumer installment loans remained flat. District member bank borrowings at the discount window were at their lowest level since March. Outstanding CD's at weekly reporting banks are also declining. Preliminary data for September indicate that District S&L's (excluding West Virginia) experienced a decline in net savings received of $97.6 million. Recent deposit activity has probably been more favorable, however. Savings deposits at banks seem to have started a recovery from their declines in August and September.

With January-August cash receipts showing only a 7-percent increase, the farm income gain over last year has narrowed further. Livestock receipts were down 1 percent, while crop receipts were up 21 percent. The history-making prices paid for this season's flue-cured tobacco marketings will most likely improve crop receipts still further. On the border belt, for instance, a 20-percent gain in seasonal average prices combined with a 7-percent boost in volume to produce
a 29-percent increase, or $67.1 million, in gross returns.