May 5, 1971
Diffusion indexes obtained from recent surveys of businessmen and bankers in the Fifth District indicate general agreement on the following points: (1) increased shipments and backlog of orders in manufacturing, but no change in new orders; (2) further slight improvement in retail sales including automobiles; (3) very slight improvement in the District employment situation; (4) further advances of prices in the manufacturing sector; (5) sharp improvement in both residential and nonresidential building activity; (6) increasing strength in loan demand at District banks; and (7) a substantially improved outlook regarding future business conditions.
District manufacturers report that their activities are continuing the improvement which began in February. They report on balance that shipments increased in April, while no significant change occurred in the volume of new orders. Backlogs of orders increased according to important producers in such industries as coal, building materials, containers, fabricated metal products, nonferrous metals, and chemicals.
Retail sales of goods and services improved further during the past four weeks, according to most reports from District bankers and retailers. Bankers' reports also indicate that automobile sales continued to advance in the District during April. Most manufacturers and retailers in the survey report some recent decline in their inventory levels.
Suggestions of an improving employment situation continue to be made by District manufacturing respondents. Although few reports of increasing employment have been received from manufacturing industries, the number which indicate further declines continues to drop. The number of District bankers who report improvement in the employment situation in their respective areas has increased in the past two months, by comparison with the last half of 1970 and the first two months of 1971. Supplies of available labor apparently continue to be adequate, however, in most parts of the District, except for certain types of skilled labor.
According to many manufacturing respondents, the backup of manufacturers' prices noted last month is continuing. Recent price advances are reported by manufacturers in textiles, synthetic fibers, chemicals, furniture, fabricated metal products, and nonferrous metals. Upward pressure on wages in manufacturing industries is reportedly continuing; most retailers and respondents in the services industries also report prices continuing to climb.
Residential construction apparently continues to advance in the District at a rapid pace. The majority of banking respondents in the major cities of all District states indicate a continuing surge of residential building. Bankers also report on balance that nonresidential construction, which had tapered off since the first of the year, began to recover in April.
The number of banking respondents indicating increased loan demand rose sharply in April. On balance, bankers report that demand for consumer loans and mortgage loans has grown during the past four weeks. Business loan demand, which had been considerably weaker, is also increasing, according to a considerable majority of banking respondents.
The recent District survey showed the highest level of respondent optimism in several months. Comments received from reporters indicate that the recent round of relatively favorable business and economic news is confirmed in the outlook of respondents in the Fifth District. Comments from manufacturing respondents indicate some anticipation of increased production levels in the months ahead, and suggest the possibility that current plans for the expansion of plant and equipment might be too low. An attitude of cautiousness continues to characterize many District respondents, but a quickening undercurrent of optimism is evident.