October 10, 1973
Results of our most recent survey of businessmen and bankers suggest that business activity in the district continued to expand during the past month, despite the fact that numerous producers were troubled by such factors as labor and raw material shortages, unusually long delays in obtaining component parts, and Phase IV controls. The level of activity in the manufacturing sector was little changed from the previous month. Retail sales increased, although automobile sales, especially of 1974 models, were somewhat below expectations. The rate of increase in the demand for business and consumer loans slowed considerably during the past month, while mortgage loan demand and residential construction declined substantially. In general, the majority of businessmen and bankers surveyed expect business conditions to stabilize at present levels.
Survey responses indicated that business activity in the district manufacturing sector continued at recent high levels during the past month. Slight increases were registered in shipments and backlogs, while new orders remained essentially unchanged. Increases in shipments and backlogs were reported by producers in such important district industries as paper, synthetic fibers, and chemicals. Production of synthetic fibers in some plants reportedly is running below capacity because of raw material shortages. Manufacturers in the electrical equipment and supply industry are experiencing problems obtaining components. Lead times for standard items are reported to be as long as 26 to 40 weeks. Textile producers are concerned about the adverse effect of rising cotton prices and Phase IV controls on the outlook for profits in that industry. Several respondents noted a sharp decline in the ladies hosiery business in recent weeks. More than 40 percent of the manufacturing respondents reported a decline in inventories and nearly 30 percent indicated that inventory levels were below desired levels.
Survey responses suggest little change in district employment in recent weeks. More than three-fourths of the manufacturing respondents reported no change in employment and hours worked per week, and all but two banking respondents indicated that employment in their areas remained unchanged since the last survey. Availability of labor continues to pose a problem for many employers in the district, especially textile and furniture manufacturers. Many textile producers are considering the elimination of the third shift because of labor shortages. Some departments in some firms already are working two ten-hour shifts with the equipment being idle for the remaining four hours.
A strong retail sales picture continues to exist in the district. All but one of the banking respondents indicated that retail sales in their areas had increased since the last survey, and, on balance, major retailers reported increases in sales. Automobile sales appear to be little changed from last month, and in some areas of the district sales of 1974 models are reported to be below expectations.
In general, the demand for business and consumer loans reportedly increased during the past month. The number of banks reporting increases in the demand for these types of loans declined significantly from the previous month, however. Mortgage loan demand apparently declined further, with 40 percent of the banking respondents reporting a decrease in the demand for this type of loan. Several respondents mentioned the adverse effect of usury laws on mortgage fund availability.
The shortage of funds continues to be reflected in residential construction activity. More than three-fourths of the banking respondents indicated that residential construction in their areas had declined. Survey responses indicate that nonresidential construction activity has changed little since the last survey. Announcements of significant new plant locations in the district continue to occur. Volvo recently announced plans to locate a $100 million manufacturing facility in Chesapeake, Virginia.
Businessmen's and bankers' expectations for the future remain essentially unchanged from last month. Nearly three-fourths of the banking respondents expect business conditions in the district to stabilize at present levels.