September 13, 1972
Area businessmen continue to be optimistic about the Third District economy. Production activity is continuing to increase. The employment picture is practically unchanged but is expected to be better in six months. Retail sales are brisk and expected to hold up through the fall. Seasonal doldrums which are said to be typical for September are holding bank deposits back. Loan demand from national borrowers is weak, but consumer, real estate, and small business loan demand is good. Business investment in inventory and plant and equipment is seen rising slowly in the months ahead. Over half of the businessmen contacted look for rising prices in early 1973.
Most manufacturing firms in the Third District responding to the Bank's monthly business outlook survey report new orders and shipments are either constant or increasing. The survey also indicates that manufacturing activity is expected to rise for the next six months. Employment prospects are improving. A growing minority of firms have expanding payrolls. The six-month outlook is promising; 40 percent of the firms foresee increased hiring by spring. However, the majority of firms still foresee no particular growth in their payrolls. Over half of the firms surveyed are not changing the number of employees or the length of the average workweek, and they don't plan to do so in the next six months.
Retail sales have been "particularly good" since tropical storm Agnes, which kept shoppers at home earlier this summer. Sales have moved up nicely on a broad front and are expected to continue strong this fall.
Philadelphia bankers report that deposits are coming in slowly, but that this is normal for September. One banker stated that he could get all the time deposits he wanted by raising interest rates but that demand deposits were hard to increase. Business loan demand from large national borrowers is sluggish at the contacted banks; one banker attributed this to the large corporation's easy access to the commercial paper market. In contrast, loan demand from local businesses, real estate buyers, and consumers is reported strong.
Area businessmen are not contributing to inventory expansion; the number of firms reporting inventory increases is about equal to the number of firms cutting their inventories. However, six months from now half the responding businessmen expect to be increasing inventories, compared with 17 percent who plan decreases.
New plant and equipment expenditures within the next six months are expected to increase, but the number of firms planning such expenditures dropped slightly from last month's survey.
The responding businessmen expect inflation to be more of a problem in the future. The percentage of respondents expecting more inflation increased slightly from last month's survey. About one in five are paying and receiving higher prices this month; over half currently expect prices to rise within six months.