October 13, 1971
Judging from the response of businessmen and bankers, a moderate uptrend of business activity continues in the Fifth District. Manufacturers report further increases in shipments, new orders, and backlogs of orders. Furniture orders and shipments in particular have made substantial gains in the past 60 days. Growing strength is reported in retail trade, with automobile sales especially strong. Although businessmen apparently remain quite optimistic about the impact of the President's new economic program on the economy, 20 of 23 manufacturing respondents reported no recent changes in capital spending plans or inventory policy. The coal strike is affecting some areas of the District economy adversely.
Both durable and nondurable manufacturers continue to experience increases in shipments, new orders, and backlogs of orders. Strength is especially evident in firms providing construction-related items, such as bricks, tile, and plumbing supplies, with delivery schedules running up to three months behind in some cases. Concern was expressed over the already dampening effect of the coal strike on economic activity in parts of West Virginia and the potential impact of a lengthy strike.
Furniture manufacturers participating in our regular survey, as well as others contacted in a special telephone survey, were very optimistic about the outlook for the economy in general and the furniture industry in particular. Shipments and orders were reportedly much stronger in August and September than in the previous 60 to 90 days. Looking ahead, the respondents believe that the prospects for the furniture industry are better than they have been in the last two years. This fall, the industry plans to launch a nationwide advertising campaign which they believe will have a favorable impact on sales. It is not anticipated that the wage-price guidelines will present any unusual difficulties for the furniture industry.
Responses indicate that the retail trade sector is experiencing growing strength. Automobile sales appear to be especially strong, with more than two-thirds of banking respondents reporting an increase in auto sales in their areas. General optimism about near-term retail sales prospects was apparently tempered by high rates of unemployment in some local areas.
Inventories in manufacturing reportedly have declined and, as a result, they are now more in line with desired levels. Trade respondents, however, indicated that their inventories were up over the previous reporting period. The employment picture in the District has apparently changed very little in the last month. On the price front, four manufacturing respondents and one trade respondent indicated that prices received were down since the last survey. No respondents reported price increases.
Residential and nonresidential construction advanced further in the last month. More than 50 percent of banking respondents reported increases in construction in their areas. Bankers also report that loan demand remains strong, with consumer loans showing the most strength.
Damage to the corn and peanut crops from Hurricane Ginger was heavy in east central North Carolina. District cash receipts from farm marketings during January-July were 4 percent below those in the same period last year. The 1971 marketing season on border belt flue-cured tobacco markets set an all-time high, general average price.
In response to a special question concerning recent changes in capital spending plans and inventory policy, 20 of 23 manufacturing respondents reported no change in either capital spending plans or inventory policy. Two respondents indicated that capital spending plans had been increased, and another indicated that long-term capital plans are being reevaluated in light of the investment tax credit proposal. Most banking respondents believe that near-term business activity will either stabilize at present levels or increase. Only two respondents thought that business activity may decline.