Results of our regular survey of businessmen and bankers in the Fifth District indicate that the moderate expansion in business activity evident in the last several months is still under way. Manufacturers report increases in shipments, new orders and backlogs of orders, and retail sales continue relatively strong. Construction activity is not as vigorous as it has been in recent months, with some slackening in residential construction being especially evident. Loan demand continues to follow the pattern set in recent months, with consumer loan demand especially strong.

In general, District manufacturers report that shipments, new orders, and backlogs of orders are up over the previous reporting period. Increases are reported in such industries as furniture, textiles, chemicals, and electrical equipment, while decreases are reported by hosiery, apparel, and synthetic fiber producers. Manufacturers' inventories were reported to have increased slightly for the first time in several months and the level of inventories, relative to desired levels, showed some improvement over last month.

Although the long coal strike dampened business activity in some areas, on balance District bankers and businessmen in trade and services report that retail, sales are up in their areas. Further increases in automobile sales were also reported. Retailers' inventories declined substantially from the previous reporting period and the proportion of retailers reporting inventory levels too high declined sharply.

Contrary to the situation in the previous months, manufacturing respondents and District bankers report increases in employment, and manufacturing hours worked per week showed a slight increase over last month. Trade and services respondents indicate a continuation of the increase in employment which began two months ago. On balance, banking respondents report no change in the available labor supply in their areas.

Although several manufacturing and trade and services respondents reported that prices received had decline, the overwhelming majority of respondents reported no change in prices received. Price declines were especially evident among metal producers. No price increases were reported. There was a sharp increase in the number of manufacturing and trade and services respondents reporting increases in wages paid.

Responses from District bankers suggest some further slackening in both residential and nonresidential construction. For the first time in several months, the number of banks reporting a decline in residential construction in their areas was greater than the number reporting an increase. Although loan demand varies considerably from area to area in the District, demand for business and mortgage loans generally continues to follow the pattern of recent months. The number of bank respondents reporting an increase in the demand for consumer loans increased substantially over the previous period.

District farmers' cash receipts from farm marketings during January-September were 1 per cent below those a year earlier, with a 5 per cent decline in livestock receipts more than offsetting a 3 per cent gain in receipts from crops. Quality of the 1971 flue-cured tobacco crop was noticeably better than last year's, demand was strong, grade prices were the highest in history, and the general average price was at an all time high-some 8 per cent above the 1970 average.

The general economic outlook of survey respondents remains favorable. Approximately 60 per cent of the banking respondents believe that an increase in general business activity is likely over the next three months.