July 15, 1970
Information obtained in the Fifth District, through surveys of
businessmen and bankers and from directors, indicates substantial
agreement on the following points: (1) further weakness in new
orders and backlogs of orders in manufacturing; (2) further declines
in automobile sales and continued weakness in retail trade
generally, but somewhat improved consumer loan demand; (3) continued
softness in the employment situation, but fewer declines reported
than previously; (4) numerous instances of price shading in retail,
wholesale, and industrial prices; (5) continued slump in residential
construction, but slight improvement in
non-residential building;
(6) little evidence of significant capital spending cut-backs; and
(7) continued excessive levels of business inventories.
District manufacturers report further weakness recently in the volume of new orders and in backlogs of orders. Durable and nondurable goods producers alike report declines with the weakness centering in such industries as hosiery, synthetic fibers, cotton textiles, building materials, electrical equipment, and furniture. Current shipments are also reported to be continuing on the down side, which has been characteristic of district industry during most of this year.
Some optimism in the outlook for retail sales is reported, although currently, sales levels continue sluggish. Automobile sales have reportedly suffered a further decline. Some instances of quality downgrading by consumers are mentioned, although they are not widespread.
Respondents report inventory levels to be significantly higher than desired, both in manufacturing and in retail trade. Retailers report inventories have declined somewhat, but manufacturers report some recent increase.
The employment situation, though remaining basically weak, shows some evidence of having stabilized. While some further declines are noted in electrical equipment and metals, proportionately fewer respondents are reporting continued declines. Further slight cuts in hours worked, however, are reported, both in manufacturing and in trade and services.
On the unemployment side, respondents in manufacturing and in trade and services report local supplies of skilled labor to be less than adequate. They feel, however, that unskilled labor is at least adequate currently, and in some areas, more than adequate. Generally, respondents have not indicated significant further increases in unemployment, although they consider that the problem remains serious.
While respondents in trade and services report significant further increases in the prices they are receiving, manufacturers indicate some tendency toward a leveling off of prices. Instances of price shading are reported to be fairly common at both the wholesale and retail levels. In the industrial category, large capital items are reportedly being cut substantially below list prices. The same is apparently true in non-ferrous metals and synthetic fibers—two industries important to the Fifth District. Upward pressure on wages reportedly is continuing strong, particularly in textiles, furniture, and metals.
Little change is reported in the severely depressed residential construction field. Non-residential construction, which has fared somewhat better, is reported to have improved slightly, particularly in West Virginia.
Bankers report some recent improvement in the demand for business loans and consumer loans. They report, however, that the demand for mortgage loans has tapered off somewhat during the last four weeks. Demand for bank loans in the Fifth District does not appear to have been affected significantly by recent developments in the commercial paper market.
Opinions expressed in the district indicate that the pervasive element of uncertainty about the future course of the economy, which has been characteristic of businessmen's and consumers' outlooks in recent months, may have subsided slightly. Evidence is still lacking, however, that it has been replaced by any significant degree of optimism.
Manufacturers, overall, report their productive capacity to be somewhat in excess of current needs, and there are reported instances of curtailment of capital spending plans. On the other hand, there are numerous instances of increased plant and equipment investment in the hosiery, synthetic fiber, and non-ferrous metals industries, while public utilities outlays continue heavy. Reporters in the Fifth District have consistently failed to indicate any clear tendency over recent months to cut back capital spending plans.
Respondents continue to report inventory levels to be excessive across the board, and firms apparently are making deliberate efforts to hold inventories to present levels or to reduce them. Manufacturers are reportedly trying carefully to avoid inventory build-ups which may later cause production cut-backs and associated layoffs of experienced employees.