June 14, 1972
Manufacturing activity in the Third Federal Reserve District remains on the upswing and employment continues to expand. Increased capital spending plans are frequently reported by area firms. Industrial prices are, for the most part, stable in the district, although near-term price increases are anticipated by some firms. The longer-term price picture, however, has improved somewhat over the past few months. Loan demand continues to be strong on a broad front, although a flattening in activity is expected during the next few months.
Area business executives report the regional economy is continuing its upward course. The business outlook survey of large manufacturers in the district shows approximately four times as many responding firms experienced increases in new orders and shipments as recorded decreases during May. Area firms expecting increases in these key indicators outnumber those forecasting decreases by about three to one for the month of June.
This increased activity continues to have a favorable impact on the employment picture in the district. During May over 15 percent of the responding firms added workers to their payrolls while nearly 5 percent lengthened their average workweek. Forecasts for June show nearly 20 percent expecting to add workers, with over 15 percent stretching out the average workweek.
Looking ahead six months, three-fourths of the manufacturers believe the level of general business activity will be higher. Two-thirds of the respondents foresee increasing new orders and shipments a half year ahead for their own firms. In anticipation of increased business tempo, many of these firms plan a pickup in hiring during the next six months. Nearly 30 percent expect to add workers during that time span. Also, plans for capital investments six months ahead continue at a high level. Over 45 percent of the firms expect increases in capital outlays while only 5 percent anticipate cutbacks.
The price report from manufacturing firms gives mixed signals. The month of May appeared to be one of relative stability, with over 70 percent reporting no change in prices paid and over 90 percent reporting no change in prices received. Forecasts for June show a similar report for prices paid, but more firms expect to increase prices they are charging. Nearly 20 percent anticipate price increases on their own products during June. This compares with only 7 percent of the firms that reported price increases for May.
The six-month outlook for prices, however, is becoming more optimistic. In March, over 70 percent of the firms were forecasting increases in prices paid during the following six months; over 60 percent were forecasting increases in prices received. By May, less than 55 percent were predicting increases in prices paid while only approximately 40 percent were expecting to raise their own prices over the ensuing six months.
Area bankers report continuing strength in loan demand. Commercial and industrial loans are growing steadily, although demand for funds to finance inventories has been relatively weak. Real estate loans remain stable while consumer loans show some signs of improvement. The outlook is for a flattening in loan activity during the next few months, although construction is expected to remain a source of strength.