May 17, 1972
Latest information on the Fifth District economy continues to suggest a stepped-up pace of recovery, although current reports from manufacturers are somewhat less bullish than in the last month or two. The trade sector continues strong in most parts of the District, with most respondents in our latest survey indicating further sizable gains in both general retail and automobile sales. A notable, and somewhat puzzling, exception is the Baltimore Area, where retailers express keen disappointment with the level of retail sales in April and early May. Construction continues strong throughout the District. Employment is also reported on the rise, especially in the Carolinas, with further increases in wages. Our latest survey of the manufacturing and trade sectors provides little evidence of any notable pickup in inventory buying. Banking respondents, however, report increased business loan demands and continued strength in demand for consumer and mortgage loans.
Reports from District manufacturers are mixed, although the diffusion of responses in our latest survey suggests further increases in new orders and backlogs. The gains, however, are concentrated in furniture, textile, and building materials. Chemicals, paper, and steel producers report a fall-off in orders. The Survey of Manufacturers suggests no recent changes in inventory policies, with most indicating general satisfaction with current levels of stocks relative to sales. Current capacity levels are still rated on the high side by most respondents.
In the trade and service sector, both bankers and retail establishments report further improvement, although the number reporting increases in sales was less than in last month's survey. Automobile sales remain strong in most parts of the District, and truck sales are reported as unusually strong. Trade and service respondents report recent increases in inventories but indicate that current stocks are somewhat larger than desired.
More than one-third of all respondents in our latest survey report increases in employment, with both manufacturing and trade and services taking part in the gain. Trade respondents also indicate an increase in hours worked, while manufacturers report no change in the length of the workweek. Some further wage increases are reported, notably in the furniture and textile industries. Both manufacturing and trade respondents indicate no recent changes in prices received.
District bankers report that both residential and nonresidential construction in their respective areas remain strong. Fifty percent of the banking respondents indicated an increase in residential construction, and approximately one-third reported an increase in nonresidential construction. There were no reports of decreased construction activity. Bankers also report sizable recent increases in the demand for all types of loans, with demand for consumer and mortgage loans especially strong. In the Baltimore Area, keen competition for mortgages has led to more liberal terms and conventional rates as low as 6 1/2 percent.
District farmers' January-February cash receipts from farm marketings were 5 percent above a year earlier, but the increase was substantially below the national gain of 14 percent.
A high level of optimism concerning the outlook for business activity in the District continues to characterize both the banking and the general business communities. Seventy percent of the banking respondents believe that business activity will increase in the next three months, while none expects a decline. In most areas of the District, the outlook for retail sales is rated as very good, and retailers express optimism. A notable exception is the Baltimore Area, where central city retailers, especially, remain in a gloomy mood.