December 12, 1973
Business activity in the Third District is tapering off in some areas and the six-month outlook is not very bright. One in five of the firms contacted report a decrease in their current level of business activity and over 60 percent expect decreases by late spring of next year. Employment opportunities are stable at last month's level.
Investment in inventories is down slightly, but plant and equipment spending plans are strong. In the retail sector, sales are currently running slightly below expected levels. Construction activity has leveled off in most areas—especially residential construction. Area bankers report that credit is tight because deposits are only trickling in. Finally, price increases are widespread and expected to continue over the next six months. Manufacturers in the Third District responding to this month's business outlook survey report slight decreases in their output. Though roughly two-thirds of the firms report no change in their new orders, shipments, and unfilled orders, most of the remainder experienced declines. Six months from now the responding executives expect more significant decreases. Approximately half the executives contacted foresee drops in new orders, shipments, and unfilled orders by May.
Current employment opportunities are not significantly different from last month. The few firms reporting layoffs are about equal to the number that are hiring. However, the length of the average workweek has been trimmed at a few factories. By next summer, however, over one-fourth of the responding firms expect to be laying off workers and cutting down the length of their workweek.
Business investment in inventories is unchanged at most firms contacted this month. But, over 40 percent expect to cut their inventories in the first half of next year. In contrast, investment in plant and equipment is expected to be up strongly. Retail sales are not as high as might he expected for the Christmas season according to area department store executives. Most stores' dollar volume for the year-to-date is up because of inflation, but their physical volume is down slightly. Accessories, like handbags, jewelry, and sportswear, are selling well. Blankets and electric blankets are in strong demand too. Shoppers are showing preference for lower priced models when given a choice of prices.
Construction activity in the Third District has leveled off somewhat. Residential housing starts are about flat. But public works projects are up significantly. Price increases are prevalent as over 60 percent of the firms report paying higher prices, and almost 90 percent expect to be paying higher prices in the next half year.
Bank credit is tight in Philadelphia as the loan-to-deposit ratio for all of the local reserve city banks hovers around 99 percent. Demand for mortgage and commercial and consumer loans remains strong according to the bankers surveyed. But, loans are not growing faster because deposits are coming in slowly at the banks contacted, and loan applications are not being encouraged. Demand deposits are about flat. Time deposits rose slightly in the last two weeks at some of the city banks, but high short-term market rates are keeping deposit funds scarce. Most banks aren't increasing their outstanding CD's. On balance total deposits remain unchanged at most banks.