March 15, 1978
Despite some continuing disruptions from weather and strike related energy curtailments Fifth District business activity made some further advances over the past month. Responses to our survey of District manufacturers suggest continued improvement in the volume of new orders and further increases in backlogs of orders as well as a minor rebound of shipments. On a less favorable note, however, expanding inventories and rising prices were increasingly widespread. In addition, retailers apparently experienced another good month in terms of total sales. In spite of these improvements, however, the expectations of manufacturers deteriorated further in February. Judging from our survey responses, the general outlook is now weaker than at any time since last October. A major factor here seems to be the continued uncertainty regarding coal and other energy supplies over the short-term.
Of manufacturers responding to our survey nearly 40% report increased volumes of new orders in the past month and nearly as many report larger backlogs of orders than a month earlier. In addition, almost one-third report a higher level of shipments last month. Nonetheless, inventories of materials and finished goods generally expanded over the month and there remains a widespread feeling that current stocks exceed desired levels. Employment among manufacturers surveyed apparently declined slightly during the latest survey period and the average work week was essentially unchanged.
In the retail sector, survey responses suggest continued improvement in total sales and in the relative sales of big ticket items. Inventories at retail were unchanged over the past month and are now generally in line with desired levels.
Among respondents from both the manufacturing and retail sectors reports of rising prices continue widespread. Over half of the manufacturers surveyed report increases in prices paid over the past month. With respect to the outlook for business activity over the next six months, retailers remain basically optimistic. Manufacturers show considerable disagreement. But approximately one-half of the manufacturers surveyed anticipate little or no change in activity over the next six months while the rest are about evenly divided between expecting worsening and improving conditions. Much of the uncertainty among manufacturers appears to be linked to growing concern about energy availability. Resolution of the coal strike could result in a significant improvement in attitudes among manufacturers, although some respondents believe that business currently being lost because of energy curtailments will be difficult to make, up later.
In the past week several utility companies in the District moved into the second phase of emergency plans in an effort to cope with dwindling coal stocks. In general, this meant further curtailments of energy supplies to commercial and industrial users. It is not clear at this point what these curtailments will involve in terms of employment and production, but it appears likely that losses will be small if coal shipments are resumed in fairly short order.
Bank credit activity in the Fifth District over the past several weeks, after accounting for seasonal influences, appears moderate. Real estate lending continues to be depressed as a result of a weather related slow down, while consumer lending has essentially leveled off. Regional businesses, however, have increased their borrowings from District banks. At weekly reporting banks, lending to regional firms is concentrated in the intermediate and short-term categories. Demand for credit by large national firms is soft.
In the agricultural sector, estimated total cash receipts from farm marketings in 1977 show the District figure about 5 percent below the 1976 level as against a gain of about 1 percent nationally. This comparison would seem to suggest that the proportion of farmers with cash-flow problems may be somewhat larger in the District than in the nation as a whole. A 3 percent increase in District livestock receipts only partially offset an 11 percent decline in cash income from crop marketings.