November 10, 1976
Responses to our November survey of Fifth District business conditions indicate continued slack in manufacturing, but some recent improvement at the retail level. The diffusion of manufacturing responses suggests some further softening of new orders and a broad decline in order backlogs. Shipments were apparently up slightly and inventories were essentially unchanged, remaining somewhat above desired levels. Responses indicate little change in manufacturing employment but some decline in weekly hours worked. One-third of the manufacturing respondents continued to view plant and equipment capacity as excessive. Retailers report a relative gain in sales of big ticket items as well as general improvement in sales. Inventories at retail grew during the latest survey period, but are now apparently in line with desired levels. Manufacturers and retailers alike have become more optimistic concerning the outlook for the level of business activity nationally and in their respective market areas, but fewer than half of the manufacturing respondents expect the level of production in their own firms to improve during the next six months. Fifth District banking conditions reflect a moderate increase in demand for credit that is balanced by unusually strong time deposit inflows. In the agricultural sector, wet weather has delayed the harvest of peanuts, soybeans, and corn.
Manufacturing respondents, on balance, continued to report increased shipments in October, although the individual increases were less widespread than in September. The diffusion of survey responses suggests a decline in new orders for the fifth consecutive month. With regard to the pattern of industry involvement in this area, apparel, lumber, furniture, and chemicals producers appear to have accounted for much of the overall weakness, while primary metals and machinery and equipment manufacturers have made some recent gains. Backlogs of orders also declined across a broad front, as nearly half of the respondents report reductions during October. Inventories at the manufacturing level showed little change in the aggregate. One-third of the manufacturers report increases in stocks of finished goods, but nearly as many experienced declines. Manufacturers reporting reductions in the number of employees slightly outnumbered those reporting increases, but one-fourth of all respondents indicate shorter workweeks during the past month.
Nearly one-half of the retailers responding to our survey experienced improved sales in October and almost as many report an increase in sales of big ticket items relative to total sales. Responses also suggest an increase in inventories at the retail level, but every retail respondent views current levels as about right based on current and prospective sales rates. Retailers were also unanimous in calling the current number and size of outlets about right.
Concerning the outlook for the next six months, 50 percent of the manufacturers surveyed and over 40 percent of retailers expect the level of general business activity nationally to improve. Much the same view is held with regard to the level of business activity in the respondents' respective market areas and by the retailers concerning the level of sales in their own firms. Among the manufacturers surveyed, however, expectations of improvements in the level of production in their own firms are slightly less common than a month ago.
Survey respondents, both retail and manufacturing, report widespread increases in prices paid, but relatively few such increases in the prices received. Nearly 50 percent of all respondents report paying higher prices during the latest survey period, while fewer than 20 percent report increases in prices received and over 12 percent report receiving lower prices.
In the banking sector, there appears to be a moderate upward trend developing in the demand for business loans, which recently has drawn strength from the wholesale and retail trade sectors. Business loan demand is certainly not at desired levels, however, and investment in bankers' acceptances continues. Both consumer installment and real estate loans show continued strength.
The District's farm income situation improved during August, largely
because marketing of the flue-cured crop was well underway and
prices were up sharply from last year. With this improvement, total
cash farm income for the January-August period registered a 5
percent gain over a year earlier compared with 1 percent at the end
of July. Average
flue-cured tobacco prices have trended downward in
recent weeks in response to lower grade prices and poorer quality of
offerings. Season average prices continue to run about 11 percent
above a year ago, however. Excessive moisture has reduced the
quality of peanuts and damaged soybean pods. Moreover, the recent
freezing temperatures have resulted in moderate peanut harvest
losses.