Beige Book Report: Philadelphia
January 15, 1975
General business conditions in the Third District remain very soft again this month. Manufacturers posted continued declines in new orders, shipments, and unfilled orders in December, and the six-month outlook is equally as bearish. Unfortunately, the labor force appears to be shouldering much of the impact of this general decline. Retailers, too, experienced a poor sales month in December, while all sectors of the regional economy continue to be plagued by rising prices. The nominal value of construction contracts is up in the District, but the real value—including both residential and nonresidential contracts—declined in the year to date. Loan levels and loan demand remain essentially flat, with few increases expected in January. Growth in demand deposits was disappointing at area banks in December. Manufacturers in the Third District, responding to this month's business outlook survey, report another bleak month for the general level of industrial activity in the Third District. Over 50 percent more of the respondents report a decrease in the general level of business activity in December than report an increase, and executives are experiencing similar conditions in their own firms. Nearly half of the respondents polled report decreasing new orders, shipments, and unfilled orders this month. In addition, the manufacturers' six-month outlook is only slightly more optimistic. Only 30 percent more of the businessmen expect increases in these indicators than expect declines. Capital investment plans still remain mixed.
The labor force appears to be hard struck by these general declines. Over 37 percent of the employers responding report decreases in their work force, and not only do fewer names appear on the payroll lists, but some manufacturers are also shortening the length of the average workweek. Job shortages appear likely into June, too, as those expecting an increase in these two indicators just about equal those expecting a decrease. Area retailers were also disappointed with the general level of business activity in December. December is the largest selling month for area department stores, and most posted sales only slightly above last year's dollar level. Hence, with inflation sweeping away marginal sales increases in retailing as in other industries, bottom-line figures were lower for this December than for last, and retailers are not optimistic for January either. Most feel that if they can merely meet last year's sales volume, they will have fared well. In addition, store executives forecast much more aggressive retailing in 1975 in an attempt to attract shoppers back into the stores. As in the retail industry, area manufacturers continue to be harassed by increasing prices. Fifty percent of the manufacturers polled report paying higher prices for raw goods in December, and 30 percent received higher prices for their finished goods. Expectations for June are for a continuation of this trend. About half of the businessmen expect to be receiving higher prices for finished goods and paying more for raw materials. The total of construction contracts in the Third District for November fell 5 percent below last year's value. However, the total for the year to date is 1 percent above last year's, but, with inflation taking a big bite, the real value of construction in the region fell below that of 1973. Residential construction contracts are down by 31 percent (as reported so far in 1974), and nonresidential contracts are down by 2 percent.
Loan levels at area banks rose slightly in December, but most bankers attributed the small increase to seasonal variations and increases in existing credit lines. In general, loan demand remained flat. The majority of bankers polled forecast little change in loan levels or demand in the first quarter. However, one large Philadelphia bank is forecasting an increase in the general level and demand for loans in the first quarter of 1975 and a decrease in the second quarter. Bankers were somewhat disappointed with demand deposit levels in December, as most remained flat and few customers failed to dress up end-of-year balance sheets. Time deposit levels experienced essentially no increase over November levels.