December 12, 1973
Results of our most recent survey of businessmen suggest that business activity in the District continues to expand. The energy shortage has resulted in a high level of uncertainty, however, and respondents are pessimistic about the outlook for business activity. Reports of raw material and labor shortages continue to be widespread. Retail sales showed further increases during the month of November. Employment increased further, despite a number of scattered lay-offs related to the energy shortage.
Survey responses suggest that the pace of activity in the District manufacturing sector moderated during the month of November. Although reports were mixed, a consensus of the responses indicates that shipments, backlogs and new orders were essentially unchanged. Declines in shipments, new orders and backlogs were reported by textiles and furniture producers while chemical, primary metal and machinery producers reported increases. As in recent surveys, numerous respondents commented on the disruptive impact of raw material and labor shortages, and uncertainty over the potential impact of the energy shortage is widespread. In general, manufacturing respondents reported that inventories had declined in recent weeks, and more than one-third believed that inventory levels were too low in view of sales prospects.
Employment in the District apparently increased further since the last survey. Both manufacturing and retail respondents reported additions to their work forces, and hours worked per week in manufacturing were unchanged. Scattered reports indicate some lay- offs related to the energy shortage. A number of automobile dealerships have released workers, and a sizable number have reduced their hours of operation. At least one parts manufacturer has cut back its work force.
Additional price increases were reported by the majority of manufacturing and retail respondents. Nearly 80 percent of the manufacturing respondents indicated an increase in prices paid, and one-fourth reported an increase in prices received. Increases in prices paid were reported by 100 percent of the retailers, and 70 percent reported increases in prices received.
Reports from major retailers in the District suggest that retail sales remain strong. Sixty percent of the retail respondents reported increased sales during November, with many of these noting that consumers are more price conscious because of the uncertain economic outlook. The energy crisis is apparently causing some retailers to go slow on spring orders.
Judging from the experience of large commercial banks in the District, the demand for consumer and commercial and industrial loans declined in November while the demand for real estate loans increased slightly.
Record high prices for most grades of flue-cured tobacco highlighted the 1973 marketing season. Quality of the tobacco was generally better than last year, and the general average price soared to a new all-time high of $88.13 per hundred. Volume was up 17 percent and value of gross sales hit a record $905 million, topping the value of the 1972 crop by 20 percent.
The sharply improved farm income situation has continued through the first three quarters of 1973. The District gain of 23 percent, however, is considerably less than the 34 percent recorded nationally.
In general, survey respondents are pessimistic about the economic outlook. More than 70 percent believe that the level of business activity nationally will worsen during the next six months, and more than 50 percent believe that local business activity will decline.