April 14, 1976
Responses to our April survey of Fifth District business conditions indicate a more general improvement in the level of activity than at any time in the past year. A majority of manufacturing respondents report gains in shipments, new orders, and backlogs of orders in March, with increases in employment and in hours worked as well. Finished goods stocks apparently declined further while stocks of materials are reported to have stabilized or increased slightly. Responses suggest, however, that some further reductions in inventories may be necessary to bring them to desired levels. Reports of excessive plant and equipment capacity are less common than in recent months, but on balance current capacity remains in excess. Retailers report increased sales, with 80 percent of respondents indicating gains in sales of big ticket items relative to total sales. Retail inventories are now apparently in line with desired levels despite little change in March. Both manufacturing and retail respondents remain optimistic, expecting further improvement in the level of business activity over the next six months. Fifth District banks continue to experience unusually slack business loan demand, but increased loan demand from consumers has resulted in a modest expansion in bank loans in recent weeks.
Among manufacturers responding to our survey this month, nearly 55 percent report increases in shipments and new orders in March. Backlogs also were up at a majority of manufacturers. Inventories of finished goods continued to decline in March, but there was apparently some buildup of materials stocks. In any event, manufacturing respondents viewing current inventory levels as excessive outnumber those viewing them as inadequate by more than two to one. One textile manufacturer reported being in the process of reducing inventories to an all time low.
Among individual industries, survey responses suggest textile and apparel manufacturers continuing to outperform most others, although improvements were much more widespread this month than last. Non-electrical equipment and machinery manufacturers reported improvements in business as did manufacturers of furniture and fixtures. Survey responses suggest that demand continues to lag in the chemicals industry.
Nearly one-third of the manufacturing respondents reported increased employment in March, and over one-third reported working an increased number of hours per week. Prices, including employee compensation, continue to rise, but there is no apparent change in the trend of recent months. Almost three-fourths of the manufacturing respondents expect the level of business activity nationally and in their individual market areas to improve over the next six months, while two-thirds expect increased production within their own firms.
Retailers reported a larger volume of sales and a higher proportion of sales of big ticket items than in recent months. Increased demand for consumer loans and improved sales of big ticket items are consistent with reports from many parts of the Fifth District confirming a significant improvement in consumer confidence and willingness to buy, Inventories at retail were essentially unchanged in March and are apparently in line with desired levels. One-third of the retailers surveyed now view their present number and size of outlets as inadequate. Over 80 percent expect the level of business activity nationally, regionally, and in their own firms to improve further over the next six months.
Bankers in several District states have reported noticeable increases in consumer lending activity in recent weeks. Improved consumer confidence is cited as an important factor contributing to this increase. Conversely, business loan demand remains unusually depressed. While there is some evidence of lending gains with regional business customers, loans to locally important industries, for example textiles, continue to be soft. Commercial and industrial loans at Fifth District weekly reporting banks are now at their lowest level since early 1974. One weekly reporting bank expects no significant increase in its commercial lending at least until fall.
District farmers' cash receipts from farm marketings in January were 4 percent below a year earlier, with a sharp drop in crop receipts more than offsetting a significant gain in receipts from livestock and livestock products. By comparison, the nation's total cash farm receipts recorded an 8 percent gain in January. Commercial peach and apple crops in Virginia and the Carolinas sustained varying amounts of freeze damage in mid-March. Losses ranged from light to severe. Land preparation for spring planting is generally ahead of schedule; corn planting is proceeding ahead of last year's pace; tobacco transplanting is underway; and small grains are in good condition.