April 10, 1974
Economic prospects on the whole have improved during the past month. Production activity is about the same as last month, but respondents foresee increased activity by fall. While employment opportunities are about even with last month, firms expect some increases in the level of employment in the next six months. Inventory spending remains unchanged from last month, although executives see boosts in capital expenditures plans in the months ahead. Construction activity, however, has weakened in the Third District. Easter sales in retail department stores are strong, but soaring prices continue to plague the regional economy. While loan demand and deposit flows leveled off during most of the first quarter, recent weeks show increases in the levels of loans and deposits. Manufacturers in the Third District, responding to this month's business outlook survey, report a divergence between current business activity and their expectations six months in the future. Currently, over two-thirds of the area manufacturers are experiencing no change in their new orders, shipments, and unfilled orders. In contrast, the six-month outlook of the area executives is more optimistic than it has been since last June. Well over a third of the respondents expect new orders, shipments, and unfilled orders to start picking up during the next two quarters. Employment in the Third District remains about where it was last month with almost 90 percent of the firms reporting no changes this month in their number of employees and the length of their average workweek. However, by next fall, almost one-fourth of the firms expect to be increasing the average length of the workweek. Virtually no firm expects a decrease in either employment indicator within the next six months.
Business investment in inventories remains unchanged this month, and over half of the firms surveyed expect this trend to continue six months out. However, manufacturers' plans for boosting expenditures for plant and equipment have increased substantially from several months ago. Almost one-half of the respondents expect to increase spending in this area by October.
Construction activity in the Third District has declined somewhat. Residential housing contracts are off slightly, and nonresidential projects are down considerably from previous levels.
Philadelphia department stores are far more optimistic this month than last. February and early March brought soft sales for retail stores. But the easing of the energy shortage and early Easter have brought shoppers back into area department stores. Accessories, children's clothes, and millinery are all selling well.
Prices continue to travel upward on a broad front. Nearly 80 percent of the Third District's respondents report paying higher prices for raw materials in April than they did in March, and nearly 60 percent report receiving higher prices in April—up from last month. But area manufacturers see no lessening in inflationary pressures during the next six months. Over three-fourths expect to be paying and receiving higher prices by October.
Loan demand has been down in Third District banks most of the first quarter. However, bankers surveyed report increases in loan demand in late March and early April. An increase in business loans appears to be responsible. Deposits seem to be following the same trend as loans have. Deposits were low during most of the first quarter with an increase reported during the last few weeks. Several banks attribute the increase to upward shifts in their time deposits. While most banks report the demand for CD's remaining flat, one bank turned in a significant increase in their volume of CD's.