April 12, 1972
Overall business activity in the Third District remains strong. District manufacturers continue to report increases in new orders, shipments, and employment. And the outlook six months ahead remains optimistic. Bankers report strengthening loan demand and increasing rates on loans and savings certificates. Retail sales show some signs of improvement, with department stores beginning to do some inventory building in particular lines.
District manufacturers responding to the Bank's monthly Business Outlook Survey continue to report a strengthening regional economy. Nearly 50 per cent reported increases in new orders during the month of March, while over 40 per cent noted increases in shipments. For both new orders and shipments, the number of firms reporting increases outpaced those experiencing declines by the widest margin in over three years.
This increased business activity is having a favorable impact on employment at area firms. Over 18 per cent of the respondents to the Survey added employees during March, while only 2 per cent trimmed their work rolls. This spread between the percentage adding workers and those reducing their labor force also represents a three-year high.
Looking beyond the immediate period, manufacturers also remain optimistic. They see continuing strength in the general business climate and in orders and shipments for their own firms. Over 40 per cent are planning to increase employees during the next six months. During that same period, over 20 per cent expect to increase their average employee workweek.
Members of the Bank's board of directors offer confirming reports of a strengthening regional economy. On the whole, the directors seem to be more optimistic than they were a month ago, primarily because they've started to see the recovery show up in their own businessses and industries.
Area bankers report a strengthening of loan demand during the past month. Most see this pickup as broad-based in the commercial and industrial categories, with some help from the consumer and mortgage sectors. Bankers expect further growth in loan demand during the second quarter as businesses transform their increasing confidence into loan requests.
On the interest rate front, most of the bankers see short rates moving up with longer rates remaining stable. Increases in the prime rate are expected. Philadelphia banks recently increased rates paid on savings certificates but have yet to offer higher rates on regular passbook accounts.
Retail conditions appear to have improved slightly over previous months. Department stores reported strength in furniture and stereo lines. In addition, they are building women's wear inventories in expectation of an extremely good fall season.