February 9, 1977
The unusual weather conditions prevailing over the last several weeks make it difficult to interpret the results of our latest survey of Fifth District businessmen. About half the manufacturers in our panel of respondents report that the severe winter weather and fuel problems have had an adverse effect on production and employment although these effects are reported for the most part to have been slight to moderate. The diffusion of manufacturers' responses indicates some reduction from a month earlier in shipments and order backlogs but an increase in new orders. While total employment in manufacturing is reported to have changed little, reductions in weekly hours worked were indicated by nearly one-third of our respondents. Reports from retailers suggest some further improvements in retail sales during the survey period. Both retailers and manufacturers continue to express optimism concerning the outlook for the next six months, although some retailers are fearful that rising home heating costs may have adverse short-run effects on consumer outlays.
There is little doubt that recent weather and fuel supply conditions have affected business operations across the Fifth District and these effects are reflected to some extent in the responses to our survey. Numerous instances of employees being kept away from work by weather conditions have been reported as have plant closings due to the cold. The energy situation is also having an effect on production, curtailing operations directly or affecting supplies or orders, of several of our survey respondents. In the agricultural sector, an abnormally harsh winter continues to damage small grains and pastures and limit fieldwork. Hay and roughage supplies continue to be depleted and are short in some areas. Feed grain supplies are somewhat more plentiful, but they, too, are well below normal.
Of manufacturers responding to our latest survey, more than one- third report a reduced volume of shipments in January and nearly as many indicate a decline in backlogs of orders. Nearly 36 percent of these respondents, however, indicate an increase in the volume of new orders since the last survey period. On balance, inventories of both materials and finished goods were somewhat higher than a month ago, with increases in finished goods being more widespread. Manufacturing employment apparently showed little change during January although hours worked per week declined at nearly one-third of manufacturing firms represented in our survey. This decline in hours is, at least partially, due to weather and fuel supply conditions prevailing over the past two weeks. More than one-third of the manufacturers surveyed now view both current inventory levels and current plant and equipment capacity as excessive. In some cases, however, the excess capacity is a result of operating at less than capacity due to the unavailability or short supplies of fuel.
Survey responses of retailers vary considerably, but on balance suggest a moderate increase in sales with no relative change in sales of big ticket items. Inventories at retail showed no change and are essentially in line with desired levels. Employment among retail respondents declined somewhat as many District retailers are operating on a modified schedule due to fuel problems.
Price increases appear less widespread as fewer manufacturers report paying and receiving higher prices and fewer retailers report increases in prices received. Most retailers, on the other hand, continue to report increases in prices paid.
Concerning the outlook for the next six months, survey respondents are more optimistic than in recent months. A majority of manufacturers and retailers now expect continued improvement nationally, locally, and for their own firms over that time period. Such expectations represent a marked improvement in the outlook of retailers from even the last survey period, and a continuation of the steady improvement in the outlook of manufacturers which began several months ago.
The January 1 Prospective Plantings report indicated that District farmers planned to increase 1977 cotton acreage 8 percent—up somewhat more than is planned nationally. But prospective feed grain plantings show little change from last year, with acreage down slightly in the District and up by a small percentage in the U.S.
District cash farm income for the first 11 months of 1976 recorded a 2.5 percent gain over the same period a year ago, compared with an increase of some 5 percent nationally.