The most recent survey of Fifth District businesses indicates that the general economic weakness is becoming more pervasive. District manufacturing remains in a depressed condition while retailers report further deterioration in sales. Reports of layoffs and plant closings have become more common, particularly in lines of production such as textiles and consumer electronics, e. g., color televisions. Our survey of manufacturers reveals further declines in shipments, orders, backlogs, and employment, with inventories of both materials and finished goods remaining in excess of desired levels. District retailers reported the first decline in the dollar volume of sales this year, as sales of big ticket items continue weak. Fifth District banking aggregates for November reflect the general slowdown in business. The results of our November survey of changes in bank lending practices seem to indicate that bankers expect this slowdown to continue over the next three months. In the agricultural sector, tobacco prices rose to record levels and, along with an increase in marketings, pushed the value of the flue-cured tobacco crop to an all-time high.

The December survey of Fifth District manufacturers indicates further substantial declines in activity. Over 75 per cent of those surveyed report declines in the volume of new orders and in backlogs, and over 60 per cent reported a lower level of shipments. Twenty-four of fifty manufacturers reported increases in finished goods inventories, and over 50 per cent view current inventory levels as excessive.

The relative volume of orders and of inventories is beginning to impact heavily on the employment picture as more firms try to reduce inventories and bring production into line with new orders. In one state alone, 20 firms laid off more than 100 employees each while 17 more laid off between 50 and 100 during November. In that state, Virginia, preliminary estimates are that unemployment may have risen by over 20,000 since October. In North Carolina, one week in November showed 47 plants laying off a total of almost 5,000 workers. The largest numbers of layoffs are occurring in such areas as textiles, furniture, and color televisions, but unemployment is now reaching into other segments of the District economy as well. Layoffs have been announced by firms in trucking, paper production, tire valve stems, and aluminum siding, among others. Survey responses suggest the slowing of economic activity is leading to a softening of the price situation. There are fewer reports of higher prices and more of lower prices than in any recent month.

Respondents indicate little optimism over the outlook for the immediate future. More than 45 per cent view current plant and equipment capacity as excessive and only 8 per cent feel current expansion plans should be enlarged. A clear majority expect the level of business activity nationally and in their respective market areas to worsen over the next six months, while almost half expect the level of production in their own firms to decline during the same time period.

Responses to the survey of District retailers suggest a decline similar to that being experienced by manufacturers. For the first time this year the survey indicates a drop in the dollar volume of retail sales. Sales were reported as flat in May and July, but had been strong during other months of 1974. The diffusion of responses showed the sixth consecutive monthly decline in sales of big ticket items relative to total sales. Fifty per cent of the retailers reported increases in inventories during November and the same number view current levels as excessive. With the exception of a few large national chains, prices at retail do not yet appear to have come under downward pressure although the responses indicate that upward pressures may be subsiding. Six-month expectations of the retailers are similar to those of the manufacturers; 50 per cent foresee further declines in the level of business activity nationally and in their own market areas, while one-fourth expect sales within the firm to worsen.

In the banking sector, seasonally adjusted bank credit at District member banks rose $10 million in November. Total loans and holdings of U. S. Government obligations increased by $75 million and $5 million, respectively. Other securities, however, declined by $70 million. Commercial and industrial loans at weekly reporting banks declined, while real estate loans remained relatively stable and consumer installment loans declined. The November loan survey reveals that price terms on bank loans have eased while non-price terms remain quite restrictive. District banks are not actively pursuing asset expansion in any of the loan categories surveyed. Member bank borrowings at the Federal Reserve Bank of Richmond declined to the lowest level since March. Outstanding CD's declined slightly, another indication that credit demand is easing.

Value of the 1974 flue-cured tobacco crop was the largest on record, topping last season's by 27 per cent or $246.8 million, Tobacco prices that soared to history-making levels and a slightly larger volume of marketings combined to produce most of the gain in value. Cash receipts from farm marketings through the third quarter of 1974 registered a 15 per cent increase over a year ago. Crop receipts, reflecting the larger tobacco income, accounted for all of the upturn. November 1 crop conditions indicated that output of some of the major field crops—especially cotton, peanuts, soybeans, and
flue-cured tobacco—will be somewhat smaller than had been expected earlier.