April 9, 1975
Economic activity remains unchanged again in April from March. Manufacturers report no change in new orders, shipments, and prices, and are optimistic for the outlook six months ahead. And, the manufacturing employment picture for late fall is more optimistic this month than it has been in quite some time. Unfortunately, however, retailers were severely damaged during the Easter season, and do not share the manufacturers' optimism for the next several months. Area banks report weak loan volumes and declining deposit levels. And, most express concern over the large Federal deficit and how it is to be financed.
Again this month, manufacturers in the Third District, responding to this month's Business Outlook Survey, report a general leveling in business activity in the region. While not yet heralding an end to the area's recessionary woes, the current survey does indicate a possible "bottoming out" in the steady decline the regional economy has been experiencing. In addition, 75 percent of the respondents expect the pace of business activity to pick up by October. And, new orders and shipments in their own firms are reflective of this general trend. Most manufacturers report "no change" in these key indicators in April, while 65 percent expect both new orders and shipments to increase by October. Despite a second month of new found optimism, however, capital investment plans six months out remain about the same. The outlook is still uncertain enough that manufacturers are not willing to alter current capital spending plans for the present.
Employment levels too remain flat in April. One half of the respondents report no change in the number of employees, and over three-fourths report no change in the length of the average workweek. However, over half of the manufacturers now expect to increase the size of their workforce by October. But with the size of the labor force continuing to expand, and with a new crop of graduates joining the workforce next month, unemployment in the region will continue to be a problem.
But, for area retailers the news is not as optimistic. Early Easters are always damaging to department store sales. But, a transportation strike by employees of the local transportation authority severely hampered Easter sales in downtown stores. And, unusually cold weather compounded the situation. Retailers report dollar sales down from the same period last year. And, the outlook for the remainder of the spring season is rather bleak.
The value of construction contracts in the Third District has declined 37 percent over the last year (the national average has declined 23 percent). The largest factor in this overall decline in the region has been a decrease in the value of residential construction contracts of 28 percent since this time last year. During the same period, nonresidential contract values have declined by only 1 percent. However, with the construction industry experiencing ever rising prices, the decline in construction in the District is likely to be even more severe.
And while rising prices are not limited to the construction industry, area manufacturers report some easing of inflationary pressures. Nearly two-thirds of the manufacturers report "no change" in the prices they pay for raw materials and the prices they receive for finished goods. And, manufacturers look for a continued easing of inflation during the next six months.
Area bankers report weak loan volumes despite a moderate easing in overall loan policies. And, all of the major banks surveyed report a general decline in overall deposits this month. With the end of the quarter statement due March 31, many banks increased their CDs outstanding significantly in order to lower loan-to-deposit ratios. However, most banks expect to continue to increase their CDs throughout April. Several banks also mentioned shifts in the composition of their portfolios. Banks appear to be interested in shortening their municipal positions and in shifting to more governments. In addition, most bankers expressed some concern over the large Federal deficit the credit markets would be forced to absorb and its effect on interest rates. And, one particular bank noted great difficulty in securing approval from its Board to purchase $25 million worth of 14-month bills. The Board expressed reluctance in extending itself out that far at this particular time.