December 12, 1973
Business activity in the Eighth Federal Reserve District generally continues at a high level, although a slower rate of activity in recent weeks was reported by a number of District businessmen. Slowing was particularly noted in retail trade and in the construction industry. Manufacturing activity continues strong, but shortages caused by government continue to hamper the production process. In the agricultural sector, crop harvesting has been largely completed with good crop yields being reported.
Businessmen seem to be more uncertain than usual about the future course of economic activity. "Shortages" of many materials, inflation, and the course of government actions are all contributing to this uncertainty. Our contacts with business indicate that at the present time the shortages and distortions caused by the controls are of greater concern than the energy problem. One result of the uncertainty is that capital spending plans for 1974 are being pared down. Some firms are stretching out their capital investment projects much longer than anticipated earlier.
Several major retail stores reported that sales have slowed in recent weeks. Retailers are generally optimistic about Christmas-oriented sales. However, the current slower rate of sales is having an impact on 1974 plans and a number of retailers are re-evaluating planned orders for the spring season. They report that such orders will likely be reduced somewhat from earlier plans. Rumors of circumvention of price and wage controls were also reported.
Construction activity has declined throughout the District. Residential construction has been the most affected, although commercial construction is also beginning to slow.
Manufacturing activity continues at a high level. Current demand for manufactured goods remains strong, but several firms anticipate some slowing in the spring. Many firms still report a backlog of orders and smaller inventories than desired. Shortages of many items continue to be reported and are expected by some firms to contribute to the slowdown in business activity in 1974.
Net inflows of savings at saving and loan institutions and commercial banks have improved further recently following small increases in July and August. Mortgage interest rates are generally holding steady, despite the reports that mortgage demand is weak.
The farm situation in the District is generally good. Harvesting has almost been completed except in some isolated areas. Large crops have been harvested, which coupled with relatively high farm commodity prices, have led to record high farm incomes. At the retail level, food prices are tending to level off, representing one of the brighter spots in the inflation picture.