August 9, 1972
Directors and other area businessmen remain optimistic about the Third District economy. While most of the key business indicators displayed no large changes in July from their June levels, signs still point to an accelerating economy. New orders and shipments are expected to rise, causing further gains in employment. Planned increases in business investment have about leveled off. Residential construction and mortgage loan demand are strong. However, consumer and business loan demand is mixed. On the darker side, prices continue to remain a source of worry to many area businessmen.
Over 90 percent of the respondents to the Bank's Business Outlook Survey expect new orders and shipments to hold steady or increase during the next few months. Although the majority of these respondents see no change in sight, the number which anticipate orders and shipments to increase is up slightly from a month ago. There is also a small but noticeable upward trend for unfilled orders and delivery times.
As a result of the increased business activity, employment prospects continue to improve. About three out of ten of the firms responding to our Business Outlook Survey plan to add to their payrolls in the coming month. This represents a small improvement in the local employment situation compared to recent months.
Capital spending plans seem to be holding steady. Area firms are divided about evenly on whether to increase their capital spending or hold it constant. Less than five percent of the surveyed manufacturers expect to reduce their investment outlays during the next six months.
Retail sales have been brisk recently. However, it's too soon to tell if this is only the result of pent-up demand which accumulated during the heavy rains of Hurricane Agnes or whether it is a result of a real upturn in consumer optimism. One director reports, however, that recreation spending will be down about 10 percent this year along the Jersey shore. He attributes this mostly to Hurricane Agnes which has caused many people from flooded areas in Pennsylvania to cancel vacation plans.
Residential construction in this area continues at a high rate. As a result, even the least aggressive area banks appear to be experiencing strong demand for mortgage credit. However, the reports about consumer and business loans are somewhat more checkered. Banks which have well-developed consumer loan departments are seeing large increases in these loans. And one large bank which aggressively seeks business loans reports it is able to obtain all the loans it wants. But, few banks seem to be doing well in both the consumer and business loan departments.
Inflationary expectations are still present. Over 10 percent of the executives polled expect their firms to pay and to receive higher prices within one month. Within six months about one-third of the firms expect increases in the prices they pay and the prices they charge. And as a result of crop destruction associated with the heavy rains and floods in the Third District, some farm prices are up. In the industrial sector, however, a director sees indications that profit margin controls will have an increased effect on dampening price hikes in coming months.