July 13, 1977
Responses to our latest survey of Fifth District business conditions suggest continued moderate expansion of activity during June. In the manufacturing sector, shipments, new orders and backlogs of orders rose further during the month. Much of this improvement, however, was accounted for in the machinery and electrical equipment industries. Retailers report little change in the overall level of sales, although there was apparently some increase in relative sales of big ticket items. Employment was up slightly among manufacturers and unchanged among retailers, and manufacturers also report some lengthening of the work week. Employee compensation was up broadly among respondents, as were other prices paid, but there was no apparent deviation from the trend of. recent months. Most manufacturers surveyed remain content with current inventory levels and with current plant and equipment capacity. Concerning the outlook for the next six months, most respondents foresee little change in the level of activity, although a sizable minority anticipate continued improvement. Demand for bank credit remains strong in the District.
Among manufacturers responding to our survey approximately one-third experienced increased levels of shipments, new orders, and backlogs of orders during June. Of these indicators the volume of new orders apparently showed the strongest performance with reports of increases more than double reports of declines. Expansion of manufacturers' inventories was somewhat greater than in May, but more than two-thirds of the respondents view current levels as about right. Manufacturing employment rose only slightly during June, according to our survey, and the manufacturing work week was extended at a few responding firms. Prices paid by manufacturers, including employee compensation, rose broadly, but only a few firms report receiving higher prices. Current plant and equipment capacity and current expansion plans continue to be viewed as about right by most manufacturing respondents.
Among individual industries, only the machinery and equipment and electrical equipment groups report consistent, across the board, improvements. Performance in the textile and apparel industries continues mixed and no industry-wide patterns are discernible. Employment has expanded rapidly in the textile industry in recent months, but has yet to return to 1974 levels. Reports from the furniture industry indicate only slight and scattered improvement in the level of activity over the past month. Much the same is true of District firms in the chemicals and primary metals sectors.
In the retail sector, sales of responding firms were flat in June although one-third of those surveyed report relative increases in sales of big ticket items. Inventories at retail were unchanged to slightly lower in June. Two-thirds of the retailers surveyed report higher average hourly earnings for employees, and one-half report that other prices, paid and received, were higher last month than a month earlier.
Manufacturers' expectations for the next six months remain basically optimistic, but slightly over one-half of the respondents foresee no change in the level of activity nationally, locally, or for their respective firms during that time period. Very few expect conditions to worsen. Two-thirds of the retail respondents expect no change in the level of activity nationally or locally within six months, but one-third anticipate some improvement in their own sales.
In the banking sector credit demand continues strong as undiminished demand for consumer installment loans is accompanied by steady increases in demand for business loans. Large District banks have recently returned to the CD market as an additional source of funds.
Drought conditions and record-breaking temperatures highlight the District's agricultural situation. Dry, hot weather has taken its toll of some crops—especially corn, hay, and pastures—in wide sections of Virginia and South Carolina and to a lesser extent in North Carolina. The drought-stricken corn crop is being cut for silage and hay in a few areas. Some Virginia and South Carolina farmers are selling their cattle because of poor pasture conditions. Thousands of chickens and turkeys have died in North Carolina from the tremendous heat built up inside truck coops as they were being transported from farm to market.
District farm income continues to run well ahead of last year, registering a 9 percent increase during the January-April period compared with less than a 1 percent gain nationally. Record high prices, improved quality, and sharply larger volume characterized the marketing season for the 1976 crop of Southern Maryland tobacco.