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Atlanta

/beige-book-reports/1972/1972-05-at

"Beige Book Report: Atlanta\nMay 17, 1972\nWith few exceptions, Sixth District businessmen and bankers report \r\nstrong economic expansion and an optimistic outlook. A citrus \r\nindustry executive describes Florida's economy as \"busting out all \r\nover,\" and a Tennessee banker indicates that economic conditions in \r\nhis area are \"very strong and the mood of the people is great.\" \r\n\"Full employment\" conditions are claimed in Atlanta and parts of \r\nTennessee and Florida. However, talk of inflation seems to have \r\nsubsided somewhat.\nNonresidential construction appears to be strengthening, and \r\nresidential construction remains strong. Downtown Jacksonville is \r\nreported to be a maze of sidewalk barricades because of a near \r\ntripling of construction activity in the past three years. A \r\nbuilding boom is also reported in Birmingham, and a $30-million \r\ncoliseum is being planned on the Mississippi Gulf Coast. Plans for a \r\nnew city of 80,000 have been announced for an area 25 miles west of \r\nNew Orleans. A 7,400-acre development-with an eventual population of \r\n37,000-is being planned near Palm Beach, Florida. A $25-million \r\nmotel condominium project has been announced for Florida's Northwest \r\nGulf Coast. Construction has been so great at two areas near Orlando \r\nthat they have declared moratoriums on multi-family construction in \r\norder to study density and site plans and to update zoning maps. A \r\nTennessee director claims that construction is so strong in his area \r\nthat that any farmer with a saw and hammer has become a general \r\ncontractor.\nAnnouncements of new plants and plant expansions continue at a \r\nmoderate pace. For example, a $50-million plant owned by Playtex \r\nCorporation has recently been announced for East Alabama. A nuclear \r\nreactor component plant under construction in Pensacola is being \r\nexpanded. This plant is reportedly booked solid through 1975 and is \r\ntaking orders for delivery as far out as 1981.\nIn many areas of the District, unemployment is reported to be nearly \r\nnonexistent. An Atlanta director adds that output per manhour has \r\nheld up well and job turnover has been low compared with other \r\nperiods of full employment. Some directors have been suspecting that \r\nthe unemployment statistics are inflated. One notes that workers \r\nreceiving unemployment insurance have been working as day laborers \r\non farms and taking wages only in the form of cash. Two hundred \r\nengineers are being transferred to the Mississippi Gulf Coast \r\nbecause of a high level of shipyard activity. However, unemployment \r\nis reportedly high in New Orleans and Lake Charles, Louisiana.\nRetail sales are reported strong. Sporting goods are particularly in \r\nstrong demand. A Central Tennessee boat manufacturer indicates that \r\nhe does not have sufficient space to produce boats on order. The \r\nNashville recording industry is reportedly experiencing a 25-percent \r\ngain over last year. Earlier this year, Disney World's projected \r\n1972 attendance was raised from 8 to 10 million, but actual \r\nattendance is running at a higher rate. Attendance at other Florida \r\ntourist attractions is up strongly.\nA sample of three New Orleans consumer finance companies indicates \r\nloan demand trends from \"steady\" to \"down slightly.\" All companies \r\npolled report that collections have been good and that the downward \r\ntrend in loan demand \"would probably be with us for a few more \r\nmonths.\" All reported interest rates down slightly, reflecting the \r\nlower demand level. One expressed the opinion that consumer \r\nborrowers are still uncertain of Phase II controls, as evidenced by \r\nthe decline in income tax borrowing this year. One company expressed \r\nsurprise that the improvement in delinquency ratios in recent months \r\nhas not yet been followed by an increase in loan demand.\nThere have been few reports of inflationary psychology despite tight \r\nlabor markets and some bottlenecks in construction. A shortage of \r\ncement is reported in several parts of Florida. An executive of an \r\nAtlanta plumbing supply firm indicates that Atlanta's construction \r\nindustry is pressing against capacity. A small hospital in Florida \r\nreports that it incurred sharp cost increases when renewing service \r\nand maintenance contracts recently. There is also reported to be a \r\nshortage of small farm machinery.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1972/1972-05-ph

"Beige Book Report: Philadelphia\nMay 17, 1972\nThe general tone of conditions in the Third District continues to be \r\none of steady improvement. Area manufacturers report further \r\nincreases in new orders and shipments for both April and May and, as \r\na result, have added employees and lengthened the average workweek. \r\nAnd these firms see continued expansion during the months ahead. \r\nPrices show signs of stability at these firms, both for prices paid \r\nand prices received. Loan demand is growing steadily at area banks \r\nwith more of the same predicted for the next month.\nDistrict manufacturers polled in the Bank's Monthly Business Outlook \r\nSurvey report continuing strength in the regional economy. Over 45 \r\npercent saw overall business conditions improving during the last \r\ntwo months. This increased activity meant improved conditions for \r\nmany firms. Approximately 30 percent of the firms reported increases \r\nin new orders and shipments for April, while over 35 percent report \r\nincreases in the same categories so far in May. This pickup is \r\nhaving a favorable impact on the regional employment picture. Nearly \r\n8 percent of the firms added employees in April, while over 16 \r\npercent report they are doing so in May. In addition, some firms are \r\nlengthening their average employee workweek. And the outlook appears \r\nfavorable during the next few months. Over 40 percent of the firms \r\nsee improved overall conditions in June, with over 35 percent \r\npredicting a pickup in new orders and shipments. On the six-month \r\nhorizon, nearly 70 percent see increases in new orders and \r\nshipments. Almost 30 percent plan to add employees over that time \r\nspan, with 17 percent stretching out the average workweek. Nearly 50 \r\npercent report they will be increasing capital expenditures during \r\nthe next six months.\nDespite this increase in business activity, the price picture \r\nappears to be remaining fairly stable. In April, nearly 65 percent \r\nof the firms reported no change in prices paid, while nearly 80 \r\npercent reported no change for prices received. Comparable figures \r\nfor May are at the 70 and 90 percent levels respectively.\nLoan demand at area banks is growing slowly but steadily over a wide \r\nvariety of sectors. Commercial and industrial loans show moderate \r\nimprovement.\nThere appears to be particular strength in construction, mortgage, \r\nand foreign loans. The outlook over the next month appears \r\noptimistic, especially in construction, real estate, and consumer \r\ncategories.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1972/1972-05-sl

"Beige Book Report: St Louis\nMay 17, 1972\nEconomic activity in the Eighth District continues up at a moderate \r\nrate according to a selected group of businessmen. Manufacturing \r\ncontinues to expand at about the same rate as in recent months. \r\nConstruction, while leveling off from the rapid growth rates of the \r\npast year, remains at very high levels in most of the District. \r\nTotal employment is increasing moderately. The outlook for \r\nagriculture is optimistic. Investments in equipment and plant \r\nmodernization are on the upswing, but profit prospects are still not \r\nsufficient to provide incentive for major investment programs. \r\nBusiness loans at banks are expanding moderately, and savings are \r\ncontinuing to flow into financial agencies at a high rate. On the \r\nless optimistic side, growth of sales at major department stores has \r\napparently leveled off in recent weeks, and unemployment in the St. \r\nLouis SMSA remains near the relatively high U.S. rate.\nManufacturing firms in the District report that sales and orders \r\ncontinue to expand moderately. No recent layoffs were indicated, and \r\nsome firms have increased employment. All manufacturers interviewed \r\nreport considerable optimism as to the business outlook for the \r\nremainder of 1972.\nConstruction continues at a high rate throughout most of the \r\nDistrict. Both commercial and residential construction is \r\napproaching record levels in many areas of the District. The St. \r\nLouis SMSA is, however, an exception. Single family homebuilding in \r\nthe St. Louis SMSA is up from 1971, but multi-family and commercial \r\nconstruction activity is very low. One-third of the construction \r\nwork force in St. Louis is estimated to be out of work, as home \r\nbuilding can absorb only a small portion of the idled commercial \r\nconstruction workers.\nThe outlook for farm income in the Eighth District remains \r\noptimistic. Weather conditions have been satisfactory, and current \r\nprice levels for farm products point to the possibility of \r\nsubstantial increases in net farm income for the year. As a result \r\nof high income expectations, sales of farm production items are well \r\nabove year-ago levels.\nWhile investments in plant modernization and equipment continue to \r\nexpand, little interest has developed in overall plant expansion. \r\nMost businessmen report that profit margins are still too low to \r\nprovide incentive for major plant expansion. Some complain that \r\nsales can only be made at profitless levels.\nAlthough still viewed as satisfactory, sales of major department \r\nstores have apparently leveled off in recent weeks. Furthermore, \r\nretailers report that it is increasingly difficult to make a profit. \r\nNevertheless, this is one area where some new investments are taking \r\nplace, even in the St. Louis SMSA. A number of new shopping centers \r\nare under construction around the fringe areas of the City of St. \r\nLouis, but this additional space is partially offset by inner city \r\nvacancies.\nBank credit for commercial purposes has begun to increase moderately \r\nin recent weeks. Lending officers at District banks report that \r\ninterest rates on such loans are expected to strengthen in the \r\nmonths ahead as demand for credit expands. Funds at savings and loan \r\nassociations remain abundant, but no further reductions in mortgage \r\nrates are expected.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1972/1972-05-mi

"Beige Book Report: Minneapolis\nMay 17, 1972\nDistrict bank directors were unanimous in expressing the opinion \r\nthat District consumer sentiment has strengthened and that second \r\nquarter retail sales are expected to improve. Reports on capital \r\nspending, however, varied, with some of the directors reporting a \r\npickup while others reported no increase. Aside from rising vacancy \r\nrates for apartments in the Minneapolis/St. Paul Metropolitan Area, \r\nthe residential construction market in the District continues \r\nstrong. First quarter demand for long- and intermediate-term \r\nagricultural credit was robust and is anticipated to remain vigorous \r\nin the second quarter.\nConsumer sentiment has improved, and bank directors report that \r\nDistrict retailers expect their sales to advance noticeably in the \r\nsecond quarter. Although his firm's sales gain in April failed to \r\nmatch February's and March's performances, one director anticipates \r\na good second quarter and attributes April's poor showing to the \r\nyear's timing of Easter. A Twin City Area banker noted a marked \r\nincrease in consumer sentiment and indicated that it was reflected \r\nin automobile sales and installment loans. So far this year, retail \r\nsales in another director's area have been good, and he expects them \r\nto continue to improve. In South Dakota, the recent improvement in \r\nthe cattle and hog markets has resulted in improved consumer \r\nattitudes and a pickup in retail sales. A similar view was expressed \r\nby a director from Southwestern Montana where increased cattle \r\nprices and expanding copper production have stimulated consumer \r\nspending. Two directors, however, revealed that uncertainties over \r\nthe Vietnam War recently tended to dampen consumer sentiment in \r\ntheir areas.\nA pickup in investment spending was disclosed by several bank \r\ndirectors. A Wisconsin director, for example, stated that a shopping \r\ncenter is under construction in his area and that two additional \r\nshopping centers are expected to be built. A Montana director \r\nrelated that a considerable number of small commercial construction \r\nprojects were under way in his area, while a South Dakota director \r\nreported a rise in farm machinery sales. One director did not report \r\nan improvement in capital spending, but he did detect an increase in \r\nloans to finance inventories. In the opinion of a Twin City Area \r\nbanker, however, no pickup has occurred in either inventory or \r\ncapital spending.\nRecent surveys revealed that vacancy rates in Twin City Area \r\napartments have risen, but directors' reports disclose that this \r\nphenomenon is restricted to the Minneapolis/St. Paul Metropolitan \r\nArea. A Twin City Area banker stated that overbuilding has occurred \r\nin certain areas of the metropolitan area, but luxury apartments are \r\nexperiencing no difficulty in attracting tenants. This bank \r\nindicated that it has not experienced any deterioration in the \r\nquality of real estate loans but is being cautious in extending \r\ncredit for apartments. Outside the Twin Cities, directors reported \r\nno overbuilding of apartments and indicated that the housing market \r\nremains quite strong.\nAccording to our latest agricultural credit conditions survey, \r\ndemand for intermediate- and long-term agricultural loans increased \r\nin the District during the first quarter, while the demand for \r\nshort-term loans did not change. The strength in demand for \r\nintermediate-term loans came from an increased level of spending on \r\nmachinery and equipment.\nIt appears that the desire for long-term loans was increased by \r\nrenewed optimism about the long-term profitability of land and land-\r\nrelated long-range capital investment. The survey also indicates \r\nthat more farmers have sought long-term financing simply because \r\ninterest rates have declined.\nBecause survey respondents foresee continued farm spending, they \r\nexpect the demand for intermediate-term credit to rise throughout \r\nthe second quarter. Although the demand for short-term agricultural \r\ncredit does not appear to be poised for more than a normal seasonal \r\nincrease. Responses indicate that the demand for long-term \r\nagricultural credit is anticipated to continue to rise. Bankers also \r\ncommented in the recent survey that their interest rates charged to \r\nfarmers have become very sensitive to rates charged by their farm \r\ncredit system competitors.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1972/1972-05-cl

"Beige Book Report: Cleveland\nMay 17, 1972\nDistrict manufacturers, our industrial directors, and economists \r\nattending a recent meeting of the Fourth District Roundtable report \r\ncontinued improvements in business conditions, although there were \r\nindications of some recent slowing in steel and retail sales. \r\nResidential construction in the District has weakened recently. \r\nBusiness economists in the District are now just a shade less \r\noptimistic with regard to the business outlook than they were at the \r\nbeginning of the year.\nOur latest survey of District manufacturers reveals a slight \r\nmoderation in the rate of increase in new orders and shipments \r\nduring April (reflecting what is thought to be a temporary lull in \r\nsteel orders, following a surge earlier this year). Moderating \r\ntendencies are expected to continue during May. Manufacturers still \r\nseem reluctant to accumulate inventories, according to our survey, \r\nbut they have been increasing employment moderately and lengthening \r\nthe workweek.\nOur industrial directors report that consumer-related business has \r\nbeen strong, particularly those portions reflecting the housing and \r\nautomotive markets. Some hesitation in packaging, however, was \r\nnoted. Directors also mentioned improvement in cutting tools and \r\ndefense business.\nResidential construction contracts in the District leveled off in \r\nDecember, declined moderately in January and February, and dropped \r\nsharply in March (30 percent below their November 1971 peak).\nOn May 12, about 40 business economists attended the regular \r\nRoundtable meeting held at the Cleveland Bank. The median forecast \r\nof the group called for a $98 billion gain in this year's GNP, with \r\nreal growth at 5.5 percent, and the price deflator rising 3.7 \r\npercent. There was widespread agreement that it would be difficult \r\nto reduce the rate of inflation to below 3.5 percent for any \r\nsustained period during the next year or so. (Estimates of the \r\nFederal deficit for fiscal year 1973 in the $35 to $40 billion range \r\nwere viewed as an adverse factor in the price situation.) \r\nUnemployment was expected to average 5.6 percent during 1972, with \r\nthe rate declining to 5.3 percent by the fourth quarter.\nProfessor John Kendrick, a guest speaker at the meeting, forecast a \r\n3.5 percent, or better, gain in productivity in the private economy \r\nduring 1972, and a tapering in the rise for 1973. He indicated that \r\nas more companies reach their profit ceilings, there would be less \r\nincentive to hold down costs; as a result, productivity would be \r\nadversely affected. Over the longer run, Kendrick predicted a lower \r\nrate of productivity growth (conventionally measured) in the 70's \r\nthan in the 60's-reflecting a significantly higher share of capital \r\nspending devoted to ecological controls.\nBusiness economists whose firms are in the consumer market expressed \r\nsome concern over recent weakness in retail sales of general \r\nmerchandise, apparel, and furniture. It was thought that these sales \r\nmay be suffering in part because of consumers' adverse reactions to \r\nrising prices of food and utilities. There was also concern that \r\nrecent developments in Indochina may be a disruptive influence on \r\nconsumer spending. Economists associated with the automobile \r\nindustry said consumers have increased their new car purchases in \r\nresponse to price reductions and income changes in line with past \r\nexperience. The economists forecast domestic new car sales of 9 \r\nmillion units in 1972, and imports of 1.6 million units. For the \r\nconsumer sector as a whole, the business economists scaled down \r\ntheir forecast of the 1972 gain in PCE (from $57 billion at the \r\nprevious meeting in January to $52 billion currently).\nThe business economists also reduced their forecast of inventory \r\ninvestment for 1972, and their forecast of net exports. No further \r\ngain in residential construction outlays for the balance of the year \r\nwas expected. On the other hand, their forecasts for government \r\nexpenditures and business fixed investment are now higher than they \r\nwere in January. With respect to capital spending, there was a \r\nfeeling that we need more confirmation by way of new orders and \r\nappropriations than has recently been the case to expect plant and \r\nequipment outlays to exceed a gain of 9 percent for the year. (In \r\nrecent months, surveys have projected gains of 10-14 percent.)\nSteel industry economists noted a lull in orders from capital goods \r\nusers recently, and the steel industry is expected to use less steel \r\nthis year in its capital spending. Overall, customer stocks of steel \r\nare beginning to rise, following liquidation through the first \r\nquarter. The steel industry is continuing to recall its furloughed \r\nworkers, but because of the stretched out \"call back\" period, it \r\nwill be some time before employment recovers to the level prior to \r\nlast year's liquidation phase. The recent steel import quota \r\narrangements have improved the outlook for the steel industry.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1972/1972-05-bo

"Beige Book Report: Boston\nMay 17, 1972\nConcern over inflation and the ability of the price and pay boards \r\nto meet their goals is continuing. While profits were generally \r\nreported as having risen substantially in the first quarter of 1972 \r\nand new orders were generally rising, employment and inventories \r\nhave not been increased.\nNone of our directors indicated that their firms were currently \r\nincreasing employment, although one director indicated that his firm \r\nplans to increase employment in the second half of the year.\nThere have been no recent upward revisions in capital spending \r\nplans. Two manufacturers of machinery for the can industry indicated \r\nthat current orders were below last year's levels, but were \r\noptimistic about the second half of the year. New orders for \r\nintermediate processing goods, like white pigment, and for consumer \r\ndurable recreation equipment were reported at record levels. Despite \r\nthe pickup in orders, all the firms indicated that inventories \r\neither were being held at current levels or were continuing to be \r\ncut.\nA large area bank indicated that during the past six weeks savings \r\ndeposits have not been experiencing the previous rapid gains. There \r\nalso appears to be a softening of mortgage interest rates, with a \r\nslight drying up of demand at the current 7-7 1/2 percent levels. \r\nWeakness in business loan demand has made this bank turn to new \r\naggressiveness in finding customers and to a changing of loan \r\nstandards, at least in terms of geographic location.\nProfessors Eckstein and Wallich were critical of the recent surge in \r\nthe growth of bank reserves. While each recommended a tapering off, \r\nthey were both careful to point out that it is now too early in an \r\nexpansion to introduce a restrictive monetary policy. Although it is \r\nnot yet time to reverse monetary policy, Wallich urged the Board to \r\nconsider what policy would be appropriate if the pay and price \r\nboards are not able to curb inflationary pressures. Both Samuelson \r\nand Wallich found encouragement in the first quarter GNP figures. On \r\nthe basis of the large gain in final demand, Samuelson felt most \r\nforecasters had, like himself, revised their forecast back up to the \r\n$1145-1148 range where they stood last fall. Wallich granted that \r\nthe first quarter figures did not reflect a hesitancy he had \r\nexpected. He believes that the expansion should be strong \"from here \r\non out\" but qualified this by warning of the danger of \"spring \r\neuphoria.\" Samuelson prescribed a 7-8 percent rate of monetary \r\ngrowth over the first seven months and a trailing off to 5-6 percent \r\nin the latter part of the year. He expects short-rates to be over 5 \r\npercent by the end of the year, leaving little room to keep long \r\nrates steady or declining. In recent talks abroad, Wallich has been \r\nsurprised by the depth of the criticism by foreign central bankers \r\nof recent and past U. S. monetary policy. He noted there is a wide \r\ngap between their views and those of most American economists.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1972/1972-05-kc

"Beige Book Report: Kansas City\nMay 17, 1972\nConsumer spending strength now appears to be widening to include \r\nstepped-up purchases of some durables, particularly furniture, \r\naccording to reports received from large department stores in the \r\nTenth District. Reflecting this improved sales picture, inventory \r\ninvestment by retailers has picked up. Similarly, manufacturers of \r\nconsumer durables in the District report that they too have \r\nincreased their investment in inventories of both raw materials and \r\nfinished goods in response to an improving sales picture. Commercial \r\nbanks in the District continue to report expanding consumer \r\ninstallment and real estate loan demand, and the improving business \r\nloan demand alluded to in earlier Red Books now seems more firmly \r\nestablished. In the agricultural sector, a good crop and livestock \r\npicture, buttressed by strong consumer demand, augurs well for Tenth \r\nDistrict farm income in 1972.\nResponses from large department stores with outlets throughout Tenth \r\nDistrict states appear to confirm that sales to consumers are \r\nstrengthening. While sales of soft goods remain strong, the scope of \r\nconsumer demands now has widened somewhat to include more purchases \r\nof durables as well, particularly furniture. Present sales of \r\nfurniture are reported as very strong, with expectations that this \r\ntrend will continue on into the fall months. Accordingly, these \r\nretailers have increased their purchases for inventory, with one \r\nstore reporting a 6-month delivery lag on new furniture orders. When \r\nqueried as to whether future price considerations had a significant \r\nbearing on stepped-up inventory investment, retailers were nearly \r\nunanimous in expressing the view that present and expected future \r\nsales strength was the main justification for increased inventories, \r\nrather than any present versus future price incentives.\nDiscussions with District manufacturers of various types of consumer \r\ndurable goods elicited the view that business sales have clearly \r\nstrengthened over earlier months. With production rising in response \r\nto increased sales, and with growing expectations of future sales \r\nstrength, manufacturers' inventory behavior also is showing more \r\nbuoyancy. Purchasing managers continue to stress that stringent \r\ninventory controls remain in effect in their respective companies, \r\nbut an improved sales situation for many has dictated an increase in \r\ninventory investment. Manufacturers of small household appliances, \r\nradio and television sets, wood furniture, and cabinets were nearly \r\nuniform in noting that improved sales, rather than any present price \r\nadvantage vis a vis the future, had dictated growth in inventories \r\nof both raw materials and finished goods. One manufacturer of \r\nelectrical housewares stressed his concern over gaining extended \r\nlead time as sales improved in the months ahead. Wood furniture and \r\ncabinet manufacturers were adding heavily to inventories of raw \r\nmaterial, but were constrained in their inventory accumulation by \r\nincreasing difficulty in securing raw materials, particularly wood. \r\nNevertheless, they indicated that they would persist in their \r\nefforts to build up their stocks in anticipation of continued \r\ngrowing strength in sales.\nLoan demand at Tenth District banks continues to expand. Consumer \r\ninstallment and real estate loans remain areas of steady growth. The \r\nimprovement in business loan demand noted in the last two Red Books \r\nappears established. Furthermore, the gains now appear to be coming \r\nfrom national as well as local accounts. This is attributed to a \r\nnarrowing or elimination of the spread between the local prime rate \r\nand the national rate. Demand from local sources remains strong, \r\nsupported in some cases by special factors. Denver banks, for \r\nexample, report sharply increased borrowing by local customers, due \r\nin part to construction activity connected with the 1976 Olympics.\nDemand deposit inflows at District banks were unusually heavy in \r\nApril, while some moderation occurred in inflows of consumer-type \r\ntime and savings deposits. However, bankers contacted appear \r\nconvinced that time accounts will continue to contribute to future \r\ndeposit expansion. Large CD's have declined in recent weeks, but at \r\nleast one large bank plans to begin active solicitation of CD money \r\nin response to heightened loan demand.\nWith the exception of Western Oklahoma and the southwestern part of \r\nthe Tenth District, which are suffering from drought, crop prospects \r\nappear good at this time as soil moisture is reported as adequate-\r\nto-surplus over most of the District. In general, wheat condition is \r\nrated as good, and maturity is ahead of last year. The number of \r\ncattle on feed on April 1 was up 14 percent in District states and 9 \r\npercent nationally, compared with a year ago; and current \r\nindications are that beef supplies will continue above 1971 levels \r\nthroughout the remainder of the year. Continued strong consumer \r\ndemand for livestock products, combined with the present crop \r\noutlook, indicates that District farm income may reach a new record \r\nhigh in 1972.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/1972/1972-05-su

"Beige Book: National Summary\nMay 17, 1972\nOverall, District reports reveal continued economic expansion in \r\nmost sectors of the economy, although there are indications of \r\nslowing in certain activities. In the forefront, there is continued \r\nconcern about inflation, the wage-price controls, and the \r\nperformance of profits. Consumer sentiment and spending appear to be \r\ngathering strength in many areas, as is capital spending. \r\nResidential construction, however, is showing some signs of \r\nweakening. On balance, businessmen are still cautious with regard to \r\ninventory investment. Employment is generally rising, unemployment \r\nremains a problem. Current and prospective agricultural conditions \r\nare excellent in most parts of the nation. The major categories of \r\nbank loans are improving.\nBoston reports concern among businessmen about inflation and about \r\nthe ability of the price and pay boards to achieve their goals. \r\nEconomists attending a regular outlook session at the Cleveland Bank \r\nexpressed the view that further progress in reducing the rate of \r\ninflation will be difficult to achieve, and they think it unlikely \r\nthat inflation can be held below 3.5 percent for any sustained \r\nperiod over the next year or so. Chicago reports there is widespread \r\nirritation among businessmen over recent actions of the price \r\ncommission. Atlanta, on the other hand, mentions that there have \r\nbeen few reports of inflationary psychology, despite tight labor \r\nmarkets in their area.\nDistricts \"taking the pulse\" of the manufacturing sector report \r\nfurther gains in new orders and shipments, coupled with improvement \r\nin employment and the workweek. Richmond and Cleveland, however, \r\ndetect a recent slowdown in steel orders.\nChicago reports the demand for certain types of capital goods is up \r\nsharply, primarily for modernization rather than for expansion. \r\nSales of heavy trucks in particular are expected to remain vigorous \r\nthrough mid-1973. Businessmen in St. Louis also say their capital \r\nspending is largely for modernization and equipment, noting that \r\nprofit margins are still too low to provide incentive for major \r\nplant expansion. Chicago and Minneapolis both mention extremely good \r\nsales of farm machinery and equipment. Respondents in New York and \r\nCleveland raise questions about accepting too readily the strength \r\nimplied by recent plant and equipment surveys, at least until more \r\nevidence is available. San Francisco mentions some caution in \r\nbusiness spending plans.\nRecent consumer spending patterns are difficult to interpret, in \r\npart because the early Easter season may have distorted March and \r\nApril retail sales data. New York, Minneapolis, and Kansas City \r\nreport gathering strength in consumer sales. Chicago and Atlanta \r\nemphasize strong sales of consumer recreational goods. On the other \r\nhand, Cleveland mentions a recent weakening of GAF retail sales; St. \r\nLouis reports a leveling in department store sales; Dallas sees some \r\nsigns of weakening in nonautomotive retail trade; and Richmond says \r\nretailers in the Baltimore area were disappointed with sales in \r\nApril and early May.\nConstruction generally remains strong in most Districts, especially \r\nin Atlanta. Cleveland, however, reports a sharp drop in residential \r\nconstruction. Minneapolis mentions that rising vacancy rates in the \r\nTwin Cities are causing banks to be more cautious in their lending \r\npolicies. San Francisco notes that the high level of apartment and \r\ncommercial building in Southern California is raising concern over \r\nvacancy rates and causing banks to be more cautious in extending \r\ncredit.\nDistricts commenting on agricultural conditions (St. Louis, \r\nMinneapolis, Kansas City, Dallas, and San Francisco) report highly \r\nfavorable prospects for crops and livestock. Chicago mentioned that \r\nrecent wet weather delayed corn planting.\nDistricts commenting on bank loans report moderate to strong \r\nincreases in loan demand, except Boston, where business loans are \r\nweak.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1972/1972-05-ny

"Beige Book Report: New York\nMay 17, 1972\nOpinions expressed by Head Office and Buffalo Branch directors and \r\nother business leaders point to further advances in economic \r\nactivity. Plant and equipment spending is apparently being upgraded, \r\nconsumer confidence is improving, and the demand for business loans \r\nis strengthening. The unemployment situation, however, while \r\nimproving slightly, remains far from satisfactory.\nMost respondents looked for a further upgrading of plant and \r\nequipment spending over the balance of the year, but were more \r\nrestrained regarding the strength of the upswing than suggested by \r\nrecent surveys. Among the Head Office directors, the chairman of the \r\nboard of a large New York City bank thought the capital expenditures \r\noutlook was good, but not as favorable as the McGraw-Hill Survey \r\nindicated. The president of a large nonferrous metal firm stated \r\nthat recent reports of an upgrading of plans for capital outlays may \r\nbe \"fairly accurate,\" but could not confirm these on the basis of \r\nhis business' own experience. The Buffalo Branch directors felt the \r\ntone in the capital goods sector was taking a turn for the better \r\nand reported that a number of small businesses were expanding \r\nfacilities and that the demand for improved equipment was \r\nparticularly strong. However, a Rochester retailer, a Head Office \r\ndirector, stated that while the largest upstate firm was adhering to \r\ncurrent expansion plans, several other companies were planning \r\ncutbacks. Opinions expressed by some business leaders were also less \r\noptimistic: A senior official of a large electric equipment firm \r\nsaid talk about heavy capital spending was not reflected in his \r\nfirm's heavy machinery business, which was slow.\nAs noted in last month's report, the March-April retail sales \r\npicture has been somewhat blurred by the early Easter, which \r\nfavorably affected March sales. Nevertheless, the views expressed by \r\nmost respondents, on balance, point to the emergence of a brighter \r\nconsumer spending picture. Most of the Buffalo directors thus \r\nreported a pickup in retail sales following a somewhat disappointing \r\nEaster season in Western New York, and these directors felt that \r\nconsumers' moods had brightened. Most reported local retailers are \r\nexpecting to meet 1972 sales projections as consumer demand \r\ncontinues to strengthen. Among the Head Office directors, the large \r\nNew York City banker found the retail picture fairly encouraging, \r\nand the Rochester retailer was optimistic about the outlook, despite \r\nthe fact current business in the Buffalo-Rochester-Syracuse area was \r\nnot good. The vice president of a large nationwide chain of \r\ndepartment stores reported that sales in both March and April had \r\nbeen good, indeed better than his firm's expectations, and that on \r\nthe basis of preliminary reports, the trend was continuing in early \r\nMay. He noted special strength in home appliances and furnishings, \r\npresumably linked to the occupancy of new housing. In his view, the \r\nconsumers have not become reasonably confident, and his firm was \r\noptimistic regarding the remainder of the year. Moreover, indirect \r\nindications of gathering strength in consumer sales were also \r\nevident in the comments of several manufacturers. Thus, the senior \r\nofficial of the electric equipment firm reported their consumer \r\ngoods sales were moving well, in some areas with \"considerable \r\nstrength,\" while the president of an upstate manufacturing firm \r\nreported a significant pickup in his company's sales of auto parts.\nThose directors who expressed an opinion on the business loan \r\nsituation reported a strengthening in such credit, primarily related \r\nto construction projects. Three of the Buffalo Branch bankers \r\npointed to the increase in loans to finance the construction of \r\nmultiple dwellings units, including condominiums. One of these \r\ndirectors, while noting the strong demand for construction credit, \r\nreferred to the sluggishness in demand from national firms, which he \r\nfelt were raising needed funds in the equity and bond markets rather \r\nthan drawing on their credit lines. Some of the respondents expected \r\nan eventual improvement accumulation would bring further increases \r\nin the demand for business loans. With respect to other types of \r\nloans, among the Head Office directors, the president of an upstate \r\nbank reported a strong demand for credit in his area, especially in \r\nmortgage loans for new apartments (but also for new factories), \r\nwhile the chairman of the large New York City bank stated that loans \r\nto finance companies and real estate loans have been particularly \r\nheavy.\nThe Directors felt that some improvement-albeit scattered and as yet \r\nlimited-was occurring in the unemployment situation. The president \r\nof the metal producing corporation reported that there seems to be \r\nsome improvement in Arizona and California and pointed to the \r\nfractional rise in March and April in help wanted advertising in the \r\nWest and Southwest. The New York City banker felt the situation had \r\nimproved slightly, but remarked that a decline in the overall \r\nunemployment rate was difficult because of the sizable influx of new \r\nentrants into the work force. The Buffalo Branch directors generally \r\nagreed that there had been some recent improvement in the local \r\nemployment situation, but noted that this must be viewed against the \r\nhigh unemployment rates prevailing during the winter. They noted \r\nthat the local picture was still not good-while skilled workers were \r\nagain in demand, unemployment among the unskilled would continue to \r\nplague the area.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1972/1972-05-da

"Beige Book Report: Dallas\nMay 17, 1972\nIndicators of economic activity in the Eleventh District continue to \r\nshow strength. Industrial production rose to a record level in \r\nMarch, and total employment in the five District states continued to \r\nincrease. Construction activity in the District also picked up in \r\nMarch, after slowing in February, and retail sales continued to show \r\nsteady improvement.\nSeasonally adjusted total employment in the five southwestern states \r\nrose only slightly in March, and with the labor force continuing to \r\nexpand, the average unemployment rate rose to 4.5 percent from 4.4 \r\npercent in February. Nonfarm payroll employment continued to \r\nincrease, although not as fast as in recent months. The largest \r\nincreases among the major industry groups were in construction and \r\nfinance. Mining, transportation and public utilities showed slight \r\ndeclines, but remained above their March 1971 levels.\nThe seasonally adjusted Texas Industrial Production Index rose in \r\nMarch for the third month in a row, reaching a record 127.9 percent \r\nof its 1967 base. The manufacturing and utilities sectors both \r\ncontributed to the rise, while mining declined slightly. In \r\nmanufacturing, all durable goods industries showed production gains, \r\nwith the largest being in transportation equipment. Among nondurable \r\ngoods industries, significant gains were reported in textile mill \r\nproducts, printing and publishing, and petroleum refining. Food \r\nproducts, paper and allied products, and leather and leather \r\nproducts experienced declines in production from February, operating \r\nbelow their year-ago levels. Production of crude oil and natural gas \r\ndeclined slightly from February, but the mining of natural gas \r\nliquids, metal stone, and earth minerals increased moderately. \r\nOutput of utilities increased substantially over the month before as \r\na result of the increased distribution of electricity and gas.\nOil allowables in all four major producing states in the District \r\nwere left unchanged for May. Regulatory commissions in Texas and \r\nLouisiana announced that their rates are at the highest level proper \r\nconservation will allow. It was believed that any further increases \r\nwould damage producing fields.\nConstruction activity in the five southwestern states, as measured \r\nby the value of contracts awarded, rose significantly in March after \r\nfalling in February. Residential building continued to provide much \r\nof the impetus to the construction industry, but both nonresidential \r\nbuilding and nonbuilding construction also increased substantially. \r\nConstruction activity in Texas, however, recovered only slightly \r\nafter a substantial decline in February. Nevertheless, the \r\ncumulative value of contracts awarded in Texas during the first \r\nthree months of this year was more than a fourth higher than in the \r\ncorresponding period last year.\nSales of department stores in the District continued to show year-to-year gains during April. Among major metropolitan areas in Texas, \r\nsales were strongest in Dallas and Houston, while San Antonio showed \r\nmoderate gains and El Paso no gain over the April 1971 level. \r\nAutomobile registrations in the four largest metropolitan areas of \r\nTexas made substantial monthly and year-to-year gains in March. \r\nTotal registrations in these four areas for the first three months \r\nwere up 13.4 percent from the corresponding period a year ago.\nAgricultural prospects in the District states are progressing well. \r\nRecent rains have improved general crop and livestock conditions in \r\nall but the western states of the District. Cattle feeding continues \r\nto expand in the District's cattle feeding states of Arizona, \r\nOklahoma, New Mexico, and Texas, as the number of cattle on feed on \r\nApril 1 totaled nearly 16 percent more than a year before. This \r\ncompares with a 9-percent gain for the nation's 23 most important \r\ncattle feeding states.\nA sharp drop in prices of poultry and eggs, together with a decline \r\nin livestock prices, caused a modest decrease in the index of prices \r\nreceived by Texas farmers and ranchers during the month ending April \r\n15. The index of all crop prices rose slightly from mid-March.\nTotal credit at weekly reporting banks in the District rose \r\nmoderately in April, following a rapid advance in March. Total loans \r\nmade notable gains, as all major categories of loans rose in \r\nresponse to further improvement in economic activity within the \r\nDistrict. District banks also added to their investment portfolios \r\nin April, as sizable acquisitions of Treasury Bills exceeded \r\ndeclines in holdings of U. S. Treasury Notes and Bonds and municipal \r\nissues. Total deposits of weekly reporting banks contracted slightly \r\nin April, due mainly to a sizable reduction in the volume of large \r\nCD's outstanding.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1972/1972-04-bo

"Beige Book Report: Boston\nApril 12, 1972\nThe Bank directors contacted indicated a recent upturn in the pace \r\nof business activity. For the first time our directors show gains \r\neverywhere. At the same time, prices are generally reported as \r\nrising, and disillusionment of the effectiveness of price controls \r\nis widespread.\nThe directors said that they were now beginning to add a little to \r\ntheir work force. To control costs, manufacturers are holding down \r\novertime and are adding workers instead. Despite efforts to keep \r\ninventories lean, one conglomerate manufacturer reported moderate \r\nincreases in inventories for the first time, while another \r\nmanufacturer reported no change in overall inventory levels. New \r\norders were reported as up \"everywhere,\" with orders for capital \r\nequipment slightly better and with a supplier to the aerospace \r\nindustry seeing the first quarterly gains in three years. Capital \r\nspending plans varied between unchanged and up quite a bit (that is, \r\nup 10-15 per cent over last year).\nPrice increases from suppliers have become very common and in some \r\ncases appear to be so large that one director stated that his \r\ncompany has refused payment in some cases until proof of price \r\ncommission approval is provided. The following is a list of price \r\nchanges between 1972 - I and 1971 - IV reported by our directors: \r\nSteel prices up, die castings up a lot, raw materials for \r\nsuperalloys up 2 per cent, natural gas prices doubled, other costs \r\nin the carbon black business up 3 per cent on average. Warehouse \r\nsteel was up 3 per cent; flat ground tool steel up 3 per cent, \r\nelectric motors up 4 per cent, marble supplies up 2-3 per cent, and \r\nabrasives up 4-5 per cent. While some directors expressed the \r\nfeeling that most people are getting a little discouraged about \r\nPhase II's effectiveness, one director felt that Phase II has \r\ndelayed price increases, but even he felt that the wage-price \r\nguidelines for the year will not be met.\nA bank director said that there was growing feeling that inflation \r\nwas not going to decrease and that we were not going to control \r\ninflation. One bank director noted that savings deposit flows have \r\ncontinued very strong through April (up 18 per cent over last year), \r\nbut that demand deposits are stable in part due to businesses \r\neconomizing on their balances. Mortgage demand is reported as strong \r\nand rates as stable. Our four academic correspondents\u2014Eckstein, \r\nSamuelson, Tobin, and Wallich\u2014agreed that the recent course of \r\nmonetary policy has been \"wise.\" Eckstein and Tobin felt the bill \r\nrate was now \"in line\" and urged holding it near the present level. \r\nIf the differential between long and short rates begins to rise, \r\nTobin would advocate recalling the \"operational twist\" policy. \r\nNoting that rates abroad have been falling and expecting a rising \r\ntrend in domestic short rates anyhow, Wallich would allow the bill \r\nrate to be \"guided\" above 4 per cent by international rates in the \r\nshort run. On the other hand, he warned that a rise in long rates \r\nshould be taken very seriously, citing several econometric \r\nsimulations in which a permanent 1 per cent rise in the bill rate \r\nresulted in a $10 to $15 billion reduction in GNP. Samuelson felt \r\nthat the recent increases in short rates have not yet put undue \r\npressure on long rates. Samuelson advocates a 9 per cent rate of \r\nmonetary growth over the first half of the year, but he was willing \r\nto cater to the concerns of \"irrational money watchers\" enough to \r\nprevent a very rapid upshot.\nMost expressed some concern over recent price behavior. While the \r\nspurt in food prices is not primarily a macroeconomic phenomenon, \r\nSamuelson pointed out that it may have macrorepercussions on wage \r\nsettlements, for example. Wallich expressed optimism that Phase II \r\nwill \"broadly succeed\" in reducing the rate of inflation to 3 per \r\ncent or below, but he felt Eckstein's argument\u2014that inflation \r\nrates above a critical level of about 2 1/2 per cent generate \r\nfurther inflationary expectations\u2014is a serious possibility. \r\nEckstein himself welcomes a restudy of the price commission. He felt \r\nthe top priority for stabilization policy at present is for Congress \r\nto lower the withholding requirements. He also would be pleased if \r\nCongress should choose to be more liberal on social security \r\ncontributions.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1972/1972-04-ri

"Beige Book Report: Richmond\nApril 12, 1972\nA continuing improvement in business activity is indicated by \r\nresults of our most recent survey. On balance, manufacturers report \r\ncontinued increases in shipments, new orders, employment, and hours \r\nworked per week, and very little change in backlogs of orders. \r\nStrength in retail sales is reported by both bankers and trade and \r\nservice respondents. Little change in prices received was reported, \r\nwhile increases in wages paid were reported by a sizeable number of \r\nrespondents. More than 50 per cent of banking respondents reported \r\nthat the demand for consumer, mortgage, and business loans was up. \r\nBusinessmen in the District continue to be optimistic in their \r\noutlook for the economy in the next several months.\nDistrict manufacturers report continued increases in shipments and \r\nvolume of new orders, but very little change in backlogs of orders. \r\nDeclines in backlogs of orders were reported, however, by several \r\nmanufacturers of construction related materials. Increases in \r\nshipments were reported by textile, hosiery, and furniture \r\nmanufacturers. Manufacturers report further increases in employment \r\nand hours worked per week, while trade and service responses \r\nindicate no change in employment but a sharp increase in hours \r\nworked per week. The diffusion of responses from bankers indicates \r\nthat both employment and hours worked per week have increased in \r\ntheir areas.\nRetail sales apparently continue to be strong. More than 75 per cent \r\nof the banking respondents reported increases in general and \r\nautomotive retail sales, and all trade and service respondents \r\nindicated that sales either remained the same or increased. Few \r\nchanges in prices received were reported by either trade and service \r\nor manufacturing respondents. One-fourth of the manufacturing \r\nrespondents and one-third of the trade and service respondents \r\nreported increases in wages paid.\nAll trade respondents reported no change in inventories, while \r\nslightly more than one-fourth of manufacturers reported a decline in \r\ninventories. Inventory declines appeared to be most prevalent among \r\ntextile and synthetic fiber manufacturers. The overwhelming majority \r\nof both manufacturing and trade and service respondents indicate \r\nthat inventories relative to desired levels are about right. Lower \r\nthan desired inventory levels were reported by nonferrous metal \r\nproducers. Most manufacturers report that current plant and \r\nequipment capacity is about right.\nAccording to banking respondents, sharp increases in both \r\nresidential and nonresidential construction have occurred since the \r\nlast reporting period. Demand for all types of loans is reported to \r\nbe strong, especially consumer and mortgage loans. All but one \r\nbanking respondent reported an increase in the demand for consumer \r\nloans, and more than 60 per cent reported an increase in the demand \r\nfor mortgage loans. The demand for business loans, which has been \r\nslow for the last several reporting periods, was reported up by 50 \r\nper cent of the banking respondents.\nDistrict farmers' cash receipts from farm marketings in January were \r\nup 3 per cent over a year ago, considerably less than the national \r\ngain of 12 per cent.\nBusinessmen in the District, especially bankers, believe that the \r\nmoderate uptrend in the economy, evident in the last several months, \r\nwill continue. More than 80 per cent of the banking respondents \r\nreported that they expect an increase in business activity in the \r\nmonths ahead.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1972/1972-04-sl

"Beige Book Report: St Louis\nApril 12, 1972\nBusiness prospects continue to be viewed with optimism, according to \r\na sample of businessmen in the Eighth District. Economic activity \r\ncontinues to expand on a broad front. Department store officials \r\nreport that Easter sales exceeded expectations and that the post-\r\nEaster trend continues upward. Manufacturing activity is increasing \r\nthroughout the consumer products sectors. Farm production is \r\nexpected to remain about the same as last year, but higher farm \r\nincomes are in prospect. Residential construction remains near the \r\nrelatively high level of the past year. Few firms report additions \r\nto the work force, however some manufacturers are beginning to \r\ndiscuss the possibility of additional hirings for a second shift. \r\nInvestment in new plants and commercial buildings remains generally\r\nsluggish. Savings continue to flow into financial agencies at a high \r\nrate and loan demand is picking up, but profits of these firms for \r\nthe year are expected to be less than in 1971.\nWhile not considered spectacular, sales of goods and services are \r\nmoving ahead of year-ago levels over a wide range of products. \r\nDepartment stores reported sizeable gains in Easter and post-Easter \r\nsales compared with year-ago levels. Hardware and automobile sales \r\nare up. Hotels and restaurants likewise indicate gains, and the \r\nuptrend in airline traffic which began last fall is continuing.\nMost sectors of manufacturing continue to move ahead. Manufacturers \r\nof consumer goods, including such industries as packaging, clothing, \r\nuniforms and small tools, have all made gains in recent weeks. Some \r\nsteel firms report moderate increases in orders.\nNet farm income in the District is expected to rise 10 to 15 percent \r\nfrom year-earlier levels. Higher prices are being realized for most \r\nfarm products, especially meat animals, with little change in real \r\noutput. Farm costs are up, but the increase is less than in most \r\nrecent years.\nWhile residential construction may have leveled off somewhat in \r\nrecent months, it continues at the relatively high rate of last \r\nyear. Reports indicate that most construction activity in the \r\nDistrict is concentrated in one-family houses. A few multi-family \r\nunits are being constructed in the outlying metropolitan areas. \r\nActivity in commercial and office building, however, is generally \r\nlimited to a few schools and hospitals.\nEmployment by surveyed firms has remained relatively stable despite \r\nsizeable gains in output. Some have called back employees which were \r\nlaid off last year, and, in a few cases, plans are being made for \r\nsome additional hirings. From the comments received, however, the \r\noutlook is not good for a rapid reduction of the unemployment rate.\nInvestment in new plants and commercial buildings remains sluggish. \r\nDespite operations of near to capacity levels by many manufacturers, \r\nno great change in plant capacity is being planned. Businessmen \r\nreport that while profits are up from last year's levels, prospects \r\nfor future profits are still not sufficient to merit additional \r\ncapital outlays.\nFinancial firms in the District are predicting lower profit levels \r\nthis year than last as a result of lower interest rates. The volume \r\nof assets and of liabilities are up, but the margin between rates \r\npaid and received is down. Loan demand is rising, but the rate of \r\nincrease in the flow of savings appears to be tapering off. Some \r\nfurther decline in mortgage interest rates is expected.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/1972/1972-04-su

"Beige Book: National Summary\nApril 12, 1972\nOn the whole, District banks report that the general business \r\nclimate continues to improve. Industrial activity is increasing in \r\nmost Districts, but gains on the employment front are less \r\nwidespread. The retail sector shows signs of improvement in several \r\nDistricts both for general items and automobiles. Capital spending \r\nplans have been stepped up in some Districts, but caution remains \r\namong businessmen in other areas. Construction, however, continues \r\nto be a strong sector in most of the regional economies. Loan demand \r\nat commercial banks, in general, shows increasing strength. Concern \r\nabout inflation appears in several reports, but there is some \r\nevidence that food prices are stabilizing.\nIndustrial activity is on the upswing in most Districts. Richmond, \r\nCleveland, Boston, and Philadelphia report continued increases in \r\nnew orders and shipments at manufacturing firms. Other Districts \r\nalso report gains, with business sentiment stabilized on a \r\nmoderately optimistic level. Chicago notes particular strength in \r\nthe steel industry while St. Louis reports improvement in steel and \r\nthe consumer goods sector. Dallas attributes increases in industrial \r\nproduction in its District to an especially large boost in mining \r\nactivity.\nHowever, improving trends in business activity have yet to register \r\na nationwide impact on employment. District reports remain mixed. \r\nRichmond, Philadelphia, and Boston find firms adding workers to \r\ntheir payrolls. Richmond also reports increases in hours worked per \r\nweek. Other Districts (Cleveland, St. Louis, and Dallas) report \r\nlittle change in their overall employment picture. Chicago notes \r\nthat layoffs have become fewer in recent months and many firms are \r\nhiring again after a long drought. Minneapolis expects employment \r\ngrowth to improve but not significantly in the second quarter.\nThe retail sector shows signs of improvement in several Districts. \r\nRichmond reports continuing strong sales, both in general retail \r\nitems and in automobiles. Dallas cites sizeable gains in department \r\nstore sales and new car registrations. San Francisco finds durables \r\ndoing better than average and autos continuing steady. Other \r\nDistricts (New York, Philadelphia, Cleveland, and Minneapolis) \r\nreport only moderate improvement but more optimistic forecasts for \r\nfuture months.\nAlthough capital spending plans have increased in some Districts, an \r\naura of caution remains among businessmen elsewhere. Boston reports \r\nthat expenditure plans range from unchanged to a 10 to 15 per cent \r\nincrease over last year. Chicago also cites an improved investment \r\noutlook with orders for capital goods rising in recent months. St. \r\nLouis, however, finds investment remaining sluggish. Profits at area \r\nfirms, although up, are not sufficient to merit additional capital \r\noutlays. San Francisco reports that business investment plans remain \r\ncautious with no major revision of expectations apparent.\nConstruction remains a bright spot in many of the regional \r\neconomies. Kansas City reports housing starts are considerably ahead \r\nof last year and are expected to continue strong. Nonresidential \r\nconstruction is also expected to improve. Richmond, likewise, \r\nreports increases in both residential and nonresidential \r\nconstruction. New York reports continued strength but forecasts a \r\npossible flattening out in activity. Atlanta finds a near boom in \r\nconstruction in Florida. Other Districts (Cleveland, St. Louis, and \r\nDallas), although reporting a leveling off or even a moderate \r\ndecline, still show construction at high levels of activity.\nLoan demand at commercial banks shows increasing strength. \r\nPhiladelphia, Cleveland, Richmond, St. Louis, Kansas City, and \r\nDallas report signs of improvement in demand conditions for business \r\nloans. New York and Chicago report more sluggish activity and regard \r\nalternative sources of funds for business as a prime reason for a \r\nslack in loan demand, both now and in the near future. Boston, \r\nRichmond, Kansas City, and San Francisco report strong mortgage \r\ndemand. Richmond, Kansas City, and San Francisco also see increases \r\nin consumer installment loans.\nThose District Banks reporting on the price situation generally \r\nexpress some reason for concern. Richmond, although noting few \r\nchanges in prices received by trade and service or manufacturing \r\nconcerns, reports increases in wages paid by these firms. Chicago \r\nreports upward pressure on a wide variety of raw materials. Boston \r\ncites many areas in which price increases have become common and, in \r\nsome cases, quite large. Businessmen in the Boston area convey a \r\ngrowing disillusionment on the effectiveness of Phase II. This \r\nsentiment is also reported in the Minneapolis District. New York \r\nbusinessmen, although recognizing that Phase II is not fully \r\nadequate, nevertheless feel it is having a favorable impact on \r\ncurrent developments.\nIn the agriculture sector, conditions appear to be improving. Farm \r\nincome is up and crop production is normal or better. Spot checks by \r\nKansas City at retail food chains reveal greater price stability \r\nthan a month ago. Wholesale meat prices are expected to decline in \r\nthe near term but retail prices less so. Dallas finds livestock \r\nconditions better than a year ago, with the number of cattle on feed \r\nup substantially. San Francisco reports cattle prices holding \r\nsteady.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1972/1972-04-da

"Beige Book Report: Dallas\nApril 12, 1972\nThe economy of the Eleventh District continues to show moderate \r\nstrength. Industrial production in Texas increased moderately in \r\nFebruary, and employment in the five District states held steady. \r\nSales of department stores continued to experience significant year-to-year gains in February and March, and new automobile \r\nregistrations rebounded in February after experiencing a sharp drop \r\nin January. Construction activity slackened in February but was \r\nstill well above its year-earlier pace. The outlook for agriculture \r\nalso remains generally favorable.\nThe seasonally adjusted Texas industrial production index rose \r\nmoderately in February following a sharp advance in January. All of \r\nthe February increase resulted from a large boost in mining\u2014especially the production of crude petroleum which rose in response \r\nto the higher oil allowable. Utility output was about unchanged from \r\nJanuary, while manufacturing production slipped nearly 1 per cent. \r\nThe decline in manufacturing was due primarily to sharp drops in \r\noutput of the petroleum refining, printing and publishing, \r\ntransportation equipment, and apparel industries. These declines \r\nwere partly offset by sizeable gains in production of electrical \r\nmachinery, food, textiles, and paper.\nThe Texas Railroad Commission raised the state's oil allowable for \r\nApril to 100 per cent of maximum efficient production, allowing for \r\nfull production for the first time in a quarter century. Shortly \r\nafter its announcement, however, the allowable for the giant East \r\nTexas field was cut back to 86 per cent. Other District states left \r\ntheir allowables unchanged.\nSeasonally adjusted total employment in the five southwestern states \r\nchanged very little in February. And with the labor force about the \r\nsame as in January, the average unemployment rate for these states \r\nmatched the 4.5 per cent of a month before. This rate was down from \r\n4.9 per cent a year before. Nonfarm payroll employment edged up \r\nslightly as nonmanufacturing employment increased enough to more \r\nthan offset a slight decline in manufacturing employment.\nRetail sales in the District continue to register sizeable gains. \r\nRegistrations of new passenger cars in Dallas, Fort Worth, Houston, \r\nand San Antonio rose 16 per cent in February, with all four \r\nmetropolitan areas posting increases. Moreover, department store \r\nsales in the District were 17 per cent higher in the four weeks \r\nending March 25 than in the corresponding period a year ago.\nConstruction activity in the five southwestern states, as measured \r\nby the value of contracts awarded, fell significantly in February, \r\nwith all three major categories of construction sharing in the \r\ndecline. However, the total value of contracts in the five-state \r\nregion was still nearly a fourth larger than in February a year ago. \r\nThe decrease from January resulted from large declines in Texas and \r\nArizona.\nDistrict agriculture is progressing well. Planting intentions show \r\nan increase of cotton acreage in the five-state area, and planting \r\nis off to a good start. Range and livestock conditions are \r\nsubstantially better than a year ago and are somewhat better than \r\nthe average for the past ten years. The wheat crop is making \r\nexcellent progress, and cattle on feed is up substantially from a \r\nyear ago. The index of prices received by Texas farmers and ranchers \r\nfell nearly 4 per cent in the month ending March 15, with most of \r\nthe drop centered in commercial vegetables, cotton, and meat \r\nanimals.\nTotal credit at weekly reporting banks in the Eleventh District rose \r\nsharply in the four weeks ending March 22. Demand for business loans \r\nwas especially strong. Inflows of demand deposits moderated while \r\nnet withdrawals were reported in time and savings deposits.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1972/1972-04-ch

"Beige Book Report: Chicago\nApril 12, 1972\nThe business uptrend appears to be gathering momentum in the Seventh \r\nDistrict. Psychology and attitudes have improved markedly in recent \r\nmonths, as uncertainties have diminished. Moderate increases in \r\nemployment are reported from most areas, and further gains are \r\nexpected in the months ahead. A trend toward inventory building on a \r\nbroad front is underway. Manufacturers' order-backlogs have \r\nincreased and lead times are lengthening. Strength in residential \r\nconstruction has been maintained, and capital expenditure plans are \r\nbeing increased. Farm income prospects are favorable. Despite some \r\nrecent pickup in loan demand, lenders are willing and able to expand \r\ncredits substantially further. Upward price pressures are evident in \r\nraw materials such as nonferrous metals, steel, hides, and lumber.\nThe steel industry has led the rest of the economy in the past month \r\nor two. The pickup in orders and production in the Chicago area has \r\nbeen somewhat stronger than in the nation, with cold-rolled sheets \r\ndoing especially well. Order lead times for steel have lengthened \r\nand discounts from list prices have largely disappeared.\nThe Detroit auto firms apparently are not unhappy with the \r\nrelatively large inventories of cars, and they expect a good second \r\nquarter, perhaps bettering the advanced March pace. Sales of trucks \r\nhave been phenomenal. A strike at a District plant that produces \r\nabout half of the heavy truck engines has continued for five weeks, \r\nand is holding back heavy truck assemblies.\nOrders for capital goods have been improving in recent months. Even \r\nmachine tool builders are experiencing a rise in orders and \r\ninquiries, but from a very low base.\nDefense orders are coming through again for producers that were hit \r\nvery hard in the cutbacks of recent years. Defense is a relatively \r\nsmall factor in the Seventh District, but a reversal of the decline \r\nin procurement will be beneficial to some areas.\nLayoffs have been fewer in recent months, and many firms are hiring \r\nagain selectively after a long drought. Job prospects for college \r\ngraduates with engineering or business training are better for the \r\nfirst time in three years. But the market for liberal-arts types \r\nremains weak. Skilled white- and blue-collar workers, including \r\nsupervisory types, are in demand again, but the unskilled and \r\ninexperienced remain at a disadvantage. Want-ad volume has increased \r\nmoderately, and executive recruitment agencies report more requests \r\nfor their services.\nCrop preparation activities are proceeding normally in the District \r\ndespite cold, wet weather. In contrast to the situation in the \r\nSouthwest and on the Great Plains, moisture conditions are adequate \r\nhere. Recent price increases for corn and soybeans (associated with \r\nspeculation surrounding the visit of Butz to Moscow) could increase \r\nplanting intentions of District farmers, especially for soybeans.\nA majority of large District banks have reported some increase in \r\nbusiness loan demand in recent weeks, but they do not expect this \r\ntrend to accelerate substantially through the remainder of 1972. \r\nFunds generated from higher profits and depreciation, together with \r\nfunds obtained from the capital and commercial paper markets, are \r\nexpected to hold down demand for bank loans even if the rise in \r\nbusiness activity matches optimistic projections. Some bank \r\nexecutives describe their loan deposit ratios as \"too low,\" although \r\nthese ratios are quite high by the standards of ten years ago. In \r\norder to compete with the capital market, some banks are offering \r\nfive-to seven-year credit at 1 per cent over the prime rate, with no \r\ncompensating balances required. There is an undercurrent of \r\napprehension concerning speculation (with the use of credit) in the \r\nstock market. A large number of new equity issues of doubtful \r\nquality are being offered, as was the case in earlier periods of \r\nstock market strength. Moreover, it is said that \"bonds have no \r\nfriends,\" partly because inflation fears cause many investors to \r\nshun long-term bonds.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1972/1972-04-at

"Beige Book Report: Atlanta\nApril 12, 1972\nBusiness sentiment seems to have stabilized on a moderately \r\noptimistic level. As one northern Alabama director put it, \"The \r\neconomy appears to be settling down after its transition from \r\nrecession to recovery.\"\nConstruction activity remains near a boom level in Florida. Building \r\npermits in one county near Disney World are up about sevenfold from \r\nlast year. Motel and hotel construction is strong in many areas of \r\nthe state. A company that recently purchased property with 40 miles \r\nof waterfront on the North Florida Gulf Coast is reportedly planning \r\na $20 million condominium project.\nThe boom in residential construction may be producing some temporary \r\nbottlenecks, but it is also stimulating the building of additional \r\nfacilities for producing building supplies. Rock mines in central \r\nFlorida that supply the cement industry are operating at capacity, \r\nyet they cannot nearly keep up with demand. Lumber companies are \r\nexperiencing strong sales and two have recently announced expansions \r\nof mills. One of the two plants to be built in Georgia will produce \r\ndoors and paneling, and the other will produce wallboard.\nPlant announcements continue at a steady pace. In Panama City, \r\nFlorida, construction is expected to begin this summer on a $50 \r\nmillion plant to produce steam-generating components. A $25 million \r\nexpansion has been announced for a brewery in Jacksonville. \r\nJacksonville is also expected to be the site of a huge operation to \r\nbuild offshore nuclear generators. Two warehouses and a food \r\nprocessing plant will be built in Jackson, Mississippi.\nShipyards are also experiencing improved business. A large order for \r\nbarges was recently booked by a New Orleans yard, and the \r\nJacksonville shipyard is planning an expansion.\nOther scattered signs of strength include a substantial increase in \r\nthe volume of telephone business in Alabama. In the first two months \r\nof this year, long distance telephone conversations have increased \r\n11 per cent over the comparable period a year ago. Aluminum ingot \r\nproduction is gradually expanding in north Alabama.\nThe agricultural outlook is generally optimistic, and Florida's \r\ncitrus industry is enjoying a record year.\nDirectors from slow-growth areas in Louisiana and Alabama are not \r\noptimistic about the outlook for their areas. Furthermore, Lockheed \r\nhas announced another gradual layoff of 5,500 employees at its \r\nMarietta, Georgia plant.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/1972/1972-04-sf

"Beige Book Report: San Francisco\nApril 12, 1972\nIn the view of our directors, economic conditions have changed \r\nlittle from those of previous months. Consumer spending and \r\nconstruction remain the most important sources of strength. The \r\nagricultural outlook is also favorable in most areas and for most \r\ncrops. On the other hand, business investment expenditures continue \r\nto be relatively cautious, and this situation is mirrored in \r\nbankers' reports of moderate, rather than strong, business loan \r\ndemand.\nOur directors were asked to assess prospects for construction during \r\nthe coming year. Most directors expect a continuation this year. \r\nSingle-family home construction has been stimulated by the recent \r\nreductions in interest rates and the greater availability of \r\nfinance. Developers in many areas have had little trouble in selling \r\nhouses, especially in the medium-priced range. But nevertheless, \r\ndevelopers have been somewhat cautious. For example, new tracts have \r\ntended to be moderate-sized, and construction has been kept \r\nreasonably close to sales. As a result, there is little evidence of \r\nlarge-scale speculative building of homes. The areas with strongest \r\ndemand are southern Arizona, the San Diego and Orange County areas \r\nof southern California, and Portland.\nCommercial building and government projects, particularly for \r\nhighways and bridges, provide the other major components of \r\nconstruction demand. In particular, there are good prospects for \r\nmaintaining the recent pace of construction of office building in \r\nthe San Francisco area and in Los Angeles. A major redevelopment \r\nproject is being considered in the San Francisco area, and several \r\nlarge buildings have been announced for Portland. State expenditures \r\nfor highways and bridges in California and Oregon are expected to \r\ncontribute to construction activity.\nApartment construction, in contrast, shows a more mixed pattern. In \r\nsome areas, multi-unit construction is strong and vacancy rates are \r\nlow\u2014for example, Portland and much of southern California\u2014but in \r\nother areas there is concern about overbuilding and the possibility \r\nof higher vacancy rates\u2014for example, Salt Lake City and Los \r\nAngeles.\nThe state of Washington, which still suffers from high unemployment, \r\nremains the major exception in this favorable construction picture. \r\nConstruction activity has recovered from the low levels of 1970, \r\nbut, in general, it is not expected to be much higher than that of \r\n1971. Residential construction in the Seattle-Tacoma area is \r\ndescribed as \"sporadic,\" and there is little incentive for much new \r\nconstruction. Commercial and government projects have helped, but \r\noverall the rate of growth of construction is expected to be \r\nmoderate. Within the state, only Spokane is expected to have a \r\nrecord level of construction activity during the coming year. \r\nSpokane had not expanded as much as Seattle or Tacoma during the \r\nprevious years, and the local economy has buoyant prospects for the \r\nimmediate future.\nRetail sales have remained good, with increases in the 5 to 10 per \r\ncent range being common. Durables seem to have done better than \r\naverage, but occasional weakness in soft goods lines has been \r\nreported. Both domestic and foreign automobiles are continuing to \r\nexperience steady sales, even though the latter have had some \r\ninventory shortages. At the moment, auto dealers expect one of their \r\nbest spring seasons, even in such high unemployment areas as \r\nSeattle.\nMost of our directors in agricultural areas report good prospects \r\nfor the coming year. Wheat prices are described as rising, and \r\ncattle prices are holding steady. Certain fruit crops remain \r\nexceptions, and recent late frosts resulted in serious losses for \r\nvarious fruit crops in Utah and for grapes in California.\nBusiness investment plans remain cautious, and no major revision of \r\nexpectations is apparent. As an indication of this situation, most \r\nbankers report that business loan demand has been steady rather than \r\nstrong. There are a few exceptions where individual banks are \r\nexperiencing strong demand, but the majority indicate little change \r\nfrom recent trends. The one major exception remains construction and \r\nrelated loans, where demand is strong. Real estate and consumer \r\ninstallment lending are also continuing to rise.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1972/1972-04-ny

"Beige Book Report: New York\nApril 12, 1972\nThe directors of the New York Bank and the Buffalo Branch in general \r\nfelt Phase II still was having a favorable, if not fully adequate, \r\nimpact on current economic developments, and that the resignation of \r\nthe four labor members would not cripple the Pay Board. Most of the \r\ndirectors, as well as the retailers who were contacted, continue to \r\nbe moderately optimistic, on balance, about the retail sales \r\noutlook. Views expressed by the directors, however, on the whole \r\nsuggested that some cooling of the housing boom may be in the \r\noffing. According to most responses of the directors and of a number \r\nof bank officials, business loan demand has continued sluggish.\nAlthough the directors at both the Buffalo Branch and the head \r\noffice were not especially enthusiastic over the impact so far of \r\nPhase II, they generally agreed that the President's program was \r\nhaving some effect in restraining inflation. Those Buffalo Branch \r\ndirectors who expressed an opinion agreed that the current situation \r\nwould have been \"far worse\" without these measures, but they felt \r\nthat more stringent action would probably be needed to bring \r\ninflation under fuller control. The vice-president of a large \r\nupstate firm pointed to the slowing down in the rate of growth of \r\nnonfood prices so far this year, and similar sentiments were \r\nexpressed by the president of an upstate bank\u2014a head office \r\ndirector. The chairman of the board of a large New York City bank \r\nfelt that Phase II had been fairly effective, and he also remarked \r\nthat the Pay Board had done a \"fairly creditable job\" in view of the \r\n\"nasty problems\" it had faced. Much the same view was expressed by \r\nthe president of a large nationwide manufacturing concern. All but \r\none of the directors who commented on the subject felt that the \r\ndeparture of the four labor members would not cripple the Pay Board. \r\nIndeed, some of the Buffalo Branch directors thought that this move \r\nmight result in smoother Board operation. A New Jersey banker, \r\nhowever, reported that his staff foresaw more strikes and a \r\n\"complete breakdown\" of the efforts of the Pay Board.\nThe recent consumer spending picture has been somewhat blurred by \r\nthe early Easter holiday, which tended to boost March sales, \r\npossibly at the expense of April sales. In any event, the directors \r\nand the retailers who were contacted still present a moderately \r\noptimistic picture, particularly with respect to the coming months. \r\nIt is true that the president of a Rochester department store, a \r\nhead office director, characterized current retail sales in that \r\narea as only \"fair.\" And Buffalo Branch directors reported only \r\nslightly better performance in western New York this Easter period \r\nrelative to last year. In each case, however, these directors said \r\nthat businessmen in their area expected sales to pick up as the year \r\nprogressed. An official of a high price, high quality New York City \r\ndepartment store, who last month had reported a spurt in business by \r\nhis firm in early March, was more restrained this month. He noted \r\nthat while sales were still picking up, the rise was only \"moderate\" \r\nand smaller than had been hoped. However, he still remained \r\ncautiously optimistic, and he felt that 1972 would turn out to be a \r\nfairly good year, up to his store's expectations and better than \r\n1971. An official of a nationwide chain of medium-priced stores, on \r\nthe other hand, verged on the exuberant. He reported that his firm's \r\nbusiness had been picking up smartly, that the increased strength in \r\nthe demand for bigger ticket items he had noted last month continued \r\nin evidence, and that his firm was \"very pleased\" and looking for a \r\ngood year. The president of the large nationwide manufacturing \r\nconcern viewed the strength in his firm's corrugated container sales \r\nas signaling a rise in consumer demand.\nRegarding residential construction, the overall impression emerging \r\nfrom the views expressed by the directors was that, on balance, it \r\ncontinues strong, but that some flattening-out may be in the offing. \r\nAn upstate banker reported a considerable amount of apartment and \r\nsingle-family dwelling construction in his area. A New York City \r\nbanker remarked that a slight rise in the rate of vacancies might \r\nnot be an unfavorable development, as it might tend to reduce upward \r\npressures on rents. The senior official of the large upstate firm \r\nlooked for some cooling off of the boom in residential construction \r\nas a result of a \"slight\" rise in the rate of vacancies and in \r\nmortgage rates. Buffalo Branch directors reported some concern on \r\nthe part of builders that supply would soon exceed demand, partly, \r\nin the case of Rochester, as the result of a number of urban \r\ndevelopment projects now underway.\nReports concerning the strength of business loan demand varied \r\nsomewhat, but, on balance, pointed to continued relative \r\nsluggishness. On the one hand, the New York City banker-director \r\nreported that demand at his bank was up to levels experienced in a \r\n\"good year,\" and an upstate banker-director noted an uptrend of all \r\ntypes of loans at his bank in recent weeks. On the other hand, a \r\nRochester banker, a Buffalo Branch director, while characterizing \r\ndemand as \"fairly good\" at his own bank, indicated that reports from \r\nthe Rochester area suggested such demand continues weak. Similarly, \r\na New Jersey banker reported no pronounced increase in the demand \r\nfor business loans at his bank. These latter assessments are \r\nconsistent with the results of a special survey of five New York \r\nCity banks and four other District banks: four of the five New York \r\nCity banks reported no, or only seasonal, increases in business \r\nloans over the past month, as did three of the four out-of-town \r\nbanks. A key reason advanced for this weakness was that business \r\ngenerally appeared to be in a fairly liquid position, thus obviating \r\nthe need for bank credit at this time.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1972/1972-04-kc

"Beige Book Report: Kansas City\nApril 12, 1972\nConstruction is still an important source of economic strength in \r\nthe Tenth District. Housing starts, which have been considerably \r\ngreater than last year, are expected to continue strong through the \r\nyear, and nonresidential construction activity also is expected to \r\nimprove. District savings and loan associations report continuing \r\nlarge inflows of savings and substantially increasing mortgage \r\ncommitments. Real estate lending by banks remains strong, and banks' \r\nconstruction loans are on the rise throughout the District. Other \r\nbusiness lending is growing, though less universally than \r\nconstruction loans.\nIn the last Red Book, it was reported that retail meat prices had \r\nrisen sharply and that further increases would likely occur. The \r\nmost recent consumer price index confirms the reports made a month \r\nago, as meat prices accounted for 70 per cent of the sharp advance \r\nin retail food prices posted in February. With all the national \r\nattention on food prices, spot checks were made with a few retail \r\nfood chains to determine what changes, if any, have occurred in meat \r\nprices in recent weeks. Modest increases have occurred in some cases \r\nbut the general tone reflected greater stability than was \r\nanticipated a month ago. Very recently, meat prices have weakened, \r\nwith the respondents reporting that the prospects for further \r\ndeclines are good in the near term. Nevertheless, it is unlikely \r\nthat any downward adjustment in wholesale prices will be passed on \r\nfully to the consumer; thus, retail meat prices, after a brief \r\nperiod of uncertainty, may show less downward movement than \r\ncurrently reported.\nConstruction activity continues to be a source of strength for Tenth \r\nDistrict economic activity. Commercial and industrial construction \r\nin the District are expected to be better this year than last year, \r\nwith the last half of 1972 expected to be better than the first. \r\nRoad and heavy construction activity are expected to improve in \r\nKansas and Missouri due to actual and anticipated increases in \r\nfunding of new state highway building programs. The housing market \r\nis good, and housing starts continue well above the same period last \r\nyear. Several large housing contractors interviewed believe that \r\n1972 as a whole will continue to surpass 1971 in housing starts, \r\nalthough one respondent feels that the national housing boom may be \r\npeaking out.\nHomebuilders interviewed have varying feelings about the possible \r\neffects of changing finance costs. One company doesn't anticipate \r\nmuch effect on housing starts this year from any firming of mortgage \r\nrates, while another expects a quick change in the rate of housing \r\nstarts if mortgage rates go up later this year. A third respondent \r\nthinks that loan rates could rise one-fourth of 1 per cent with no \r\nslowdown in construction, but that a larger rise would lead to a \r\ntapering off in housing starts after a three or four month lag.\nInterviews with a number of large savings and loan associations in \r\nthe District suggest that home mortgage interest rates are expected \r\nto remain the same or rise slightly in the near future, following a \r\ngeneral decline in the last three months. Most associations reported \r\nno change in nonrate terms. Savings inflows continued to be strong \r\nthrough March at nearly all institutions interviewed, in some cases, \r\nespecially so.\nThere were two exceptions noted to this pattern: one firm reported \r\nMarch inflows not so good but noted that its competitors were doing \r\nbetter because the respondent firm is refusing \"big ticket \r\ndepositors who are too unpredictable;\" a second respondent \r\nattributed a March slowdown in inflows to its dropping of 6 per cent \r\nsavings certificates. Mortgage commitments were uniformly reported \r\nas very strong and increasing substantially. Of those firms making \r\nloans on both single-family and multi-family units, most report a \r\ngreater emphasis on single-family dwellings.\nThe upturn in business loan demand at commercial banks, seen as only \r\nquite tentative by Tenth District bankers at the time of the last \r\nRed Book, has gained in scope and size over the last several weeks. \r\nNearly all of the gains are emanating from local borrowers\u2014no \r\nupsurge was reported among national accounts. This imbalance, which \r\nmay be due to many Tenth District banks not following the prime rate \r\nwhen it went below 5 per cent earlier this year, is expected to \r\ndiminish with the rise of the national prime rate back to District \r\nlevels.\nThe upturn is least evident in Kansas City, where business lending \r\nseems fairly flat, while the most vigorous growth was reported in \r\nTulsa. Construction loans were on the rise everywhere. The advance \r\nin loans to other types of businesses is broadly based, with many \r\nindustries borrowing for a variety of purposes. Moderate gains in \r\nbusiness loans are expected during the second quarter. In other loan \r\ncategories, real estate lending remains quite strong, and consumer \r\ninstallment loans continued to rise in March, at what some bankers \r\nfeel is a faster pace.\nDemand deposits were steady or declining in March at District banks, \r\nwhile time deposits continued to climb. The \r\nseveral-months-old \r\npattern of decreases in large CD's and increases in consumer savings \r\nand time deposits continued to hold, although rising marketable CD \r\nrates are expected to moderate these trends.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1972/1972-04-mi

"Beige Book Report: Minneapolis\nApril 12, 1972\nAccording to bank directors, District businessmen believe that Phase \r\nII has not been very successful in bringing inflation under control \r\nand stated that the Pay Board's recent reorganization would not \r\nalter its effectiveness. Although employment growth was expected to \r\nimprove, no significant reduction in unemployment was foreseen for \r\nthe second quarter. Twin Cities retail sales in the first quarter \r\nwere up modestly from a year ago and are expected to improve in the \r\nsecond quarter. In addition, District first quarter new car sales \r\nwere quite strong and, due to improved farm income, District farm \r\nmachinery sales strengthened in the first quarter.\nAlthough they feel Phase II has helped, bank directors reported that \r\nDistrict businessmen are not convinced that the Administration's \r\nefforts are bringing inflation under control. Given the large wage \r\nincreases that have been permitted, one director reported that his \r\narea's businessmen consider further inflation inevitable. The only \r\nalternatives to Phase II mentioned by District businessmen were a \r\nwage-price freeze or some type of rigid controls. Because they felt \r\nboth alternatives are unworkable, the general feeling was that now \r\ninflation would persist.\nBank directors indicated that the recent resignation of labor \r\nleaders from the Pay Board would not jeopardize that body's \r\neffectiveness. In fact, the consensus was that the labor leaders had \r\nthwarted the Pay Board's past efforts and that it would probably be \r\nmore effective in the future.\nAlthough employment growth was expected to improve, a survey of \r\nemployment security offices in 16 of the District's largest labor \r\nareas revealed that generally no reduction in unemployment was \r\nanticipated. When asked to characterize the outlook for employment \r\ngrowth during the next 90 days, one respondent termed it as \r\n\"excellent,\" nine considered it \"good,\" and five called it \"fair.\" \r\nTen of the respondents looked for job openings in their areas to be \r\nup from a year ago, with eight terming the increase \"slight,\" while \r\ntwo expected job openings to match last year's level. Four \r\nrespondents anticipated job openings to be down from a year earlier. \r\nIn spite of these encouraging responses, no reduction in \r\nunemployment was foreseen. Eight respondents indicated that second \r\nquarter unemployment would be up from a year ago with five \r\nrespondents calling the increase \"slight.\" Seven respondents \r\ndisclosed that unemployment would probably match last year's second \r\nquarter level in their areas. However, a labor market analyst for \r\nthe Minneapolis/St. Paul Metropolitan Area, which accounts for a \r\nthird of the District's employment, looked for second quarter \r\nunemployment to be down slightly from a year ago.\nA telephone survey of five major retailers located in the Twin \r\nCities revealed that their sales were up from a year ago. One \r\nrespondent, however, called his firm's first quarter sales growth \r\nsoft and the increase experienced by three other firms could be \r\ntermed moderate. The first quarter Minnesota sales of one large \r\ncompany's department and discount stores were up 4.2 per cent from a \r\nyear ago, while a chain of discount stores reported a 5 per cent \r\nyear-to-year sales increase in February and March. All respondents \r\nindicated that their sales gains in March were stronger than those \r\nrecorded in January and February. In general, these respondents were \r\noptimistic about their expected second quarter sales.\nAccording to a regional sales manager, new car sales were quite \r\nstrong in the first quarter. The sales of automobiles produced by \r\nFord and Chrysler were up markedly from a year ago. Chevrolet sales \r\nexceeded last year's level by 35.0 per cent in February and 9.1 per \r\ncent in March. Although other GM Divisions experienced first quarter \r\nyear-to-year sales declines, these managers were quite pleased with \r\nthis year's sales, as these decreases can be attributed to the \r\nrecovery from the 1970 automobile strike which inflated their first \r\nquarter automobile sales last year. First quarter American Motors \r\nsales were only 1.4 per cent above a year ago.\nDistrict farm income strengthened in the first quarter which induced \r\nDistrict farmers to spend much more heavily on farm equipment. An ad \r\nhoc survey of Ninth District area sales offices of farm equipment \r\nand farm supply firms revealed that equipment sales ranged from \"no \r\nchange\" to \"20 per cent greater\" than sales in the first quarter of \r\n1971. The latest published data on farm tractor sales show that the \r\nnumber of units sold in the District during January was 19 per cent \r\nlarger than the number sold one year earlier. Practically all of the \r\nequipment manufacturers in our ad hoc survey reported that their \r\nfirst quarter sales could have been greater had not the increase in \r\ndemand caught them without adequate inventories.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1972/1972-04-cl

"Beige Book Report: Cleveland\nApril 12, 1972\nEconomic conditions in the District continue to show signs of \r\nimprovement. Area manufacturers report further gains in key areas \r\nduring March. The steel industry is returning to normal operating \r\nconditions. Residential construction contracts have declined \r\nmoderately in recent months, however, from their very high level of \r\nlast November-December. One director reported that a large number of \r\nmanufacturers and wholesalers of consumer products with whom he has \r\nmaintained steady contact for several years are quite optimistic \r\nabout the prospects for consumer spending and that his own business \r\ncontinues to operate at maximum capacity. Business loan demand at \r\nthe District's largest banks has improved during the past month.\nThe District's insured unemployment rate has held during the past \r\ntwo months, after having declined during the previous four months. \r\nNonfarm payroll employment has yet to register a strong recovery; \r\nmanufacturing employment, however, is creeping up. Preliminary \r\nresults of our monthly survey of manufacturers indicate that further \r\nstrong increases in new orders, shipments, and backlogs occurred in \r\nMarch. The upward momentum of business is expected to continue in \r\nApril.\nSteel industry economists say their firms experienced a high level \r\nof orders in March. Shipments once again are in line with \r\nconsumption, but they are just beginning to match output, as \r\nproducing mills have been building inventories. A major firm reports \r\nthat new orders in March were the best in over a year, with the \r\npickup in demand coming \"across-the-board.\" Another large steel \r\nproducer said that in recent weeks orders have leveled off on a high \r\nplateau. A third steel company also reports that orders have been on \r\na plateau, and that the demand for heavy construction steel is not \r\nshowing the usual seasonal strength; steel sheet mill employment, \r\nhowever, has returned to the prenegotiation level of last year.\nAn economist from a large machine tool company reports that machine \r\ntool business is improving gradually, although orders remain well \r\nbelow their peak. Small cutting tool orders have been rising \r\nstrongly since January 1, but aircraft and defense business \r\ncontinues to be weak. Machine tool orders usually lag about nine to \r\ntwelve months behind orders for cutting tools, according to this \r\neconomist. The firm is not planning to increase its labor force \r\nuntil their workweek rises to 40 hours. They have built some \r\ninventories of cutting tools in anticipation of rising demand, and \r\nthey expect to work those stocks down before increasing output and \r\nemployment.\nOne director, who just returned from a regional convention of \r\nhardware wholesalers and manufacturers, reported widespread optimism \r\nabout current and anticipated developments in consumer spending. The \r\nnearly uniform theme of almost all of the participants was that \r\norders and sales are far exceeding expectations. This director has \r\nmaintained close contacts with this large group of manufacturers and \r\nwholesalers for several years, in both good times and bad. \r\nReflecting the overall situation, his own firm is operating at \r\nmaximum capacity and experiencing a high level of new orders for and \r\nsales of a wide range of products for the home and for the hotel and \r\nmotel industries.\nDemand for commercial and industrial loans at the four largest \r\nDistrict banks has improved somewhat over the past month or two. One \r\nbank reports a strong increase in such lending; another has \r\nexperienced a modest increase; a third has had an increase in \r\ncommitments and inquiries; the fourth reports that loans have \r\nstopped declining. All four banks expect further improvement in loan \r\ndemand during the second quarter, as inventory building and capital \r\nspending pick up.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/1972/1972-03-su

"Beige Book: National Summary\nMarch 15, 1972\nThe overall impression that emerges from the individual District Red \r\nBook reports is one of continuing improvement in the economic \r\noutlook. Consumer spending is apparently on the rise, with \r\nindications of heightened interest in nonessential or postponable \r\ngoods and in both big ticket and higher priced items. New orders, \r\nshipments and backlogs of industrial goods are reportedly \r\nstrengthening, while business confidence is improving noticeably. \r\nThese favorable developments, however, have not as yet been \r\ntranslated into a significant turnaround in the cautious inventory \r\npolicies of businesses, and are still reflected only to a moderate \r\nextent in actual or planned increases in outlays for plant and \r\nequipment. Similarly, the increase in sales and production has not \r\nas yet found its counterpart in a sharp rise in the demand for \r\nlabor, although it has reportedly led to a limited improvement in \r\nthe unemployment picture.\nWith respect to consumer spending for goods and services, evidence \r\nof strengthening of consumer confidence can be discerned in reports \r\nto the New York Bank of increased purchases of nonessential goods \r\nand of big ticket items, and the fact that sales of durables are \r\nmuch more vigorous than those of nondurable goods in the Chicago \r\narea, with recreational vehicles such as motorcycles, golf carts, \r\nsnowmobiles and similar items leading the field. In addition, \r\nseveral banks report a sharp uptrend in passenger airline traffic \r\nand Atlanta reports booming tourist business in Florida. And while \r\nsentiments were mixed in the Philadelphia District, retailers are \r\nexpecting sales of home furnishings to be strong as a result of the \r\nhigh level of housing completions in the area. A note of caution, \r\nhowever, was sounded by some San Francisco bank respondents who \r\nquestioned whether consumer spending would become much stronger.\nConcerning construction outlays, most District reports referring to \r\nactivities in that industry and/or related industries, indicated \r\nthat residential, and in some cases (Atlanta) nonresidential \r\nconstruction, continues to be a strong element in the current \r\neconomic recovery. Some banks, however, including San Francisco, \r\nChicago and Boston, report some feeling among their respondents that \r\na leveling-off in the industry is probably in the offing.\nAs for industrial activity manufacturers participating in the \r\nPhiladelphia monthly Business Outlook Survey report a further pickup \r\nin new orders and shipments in February, which is expected to \r\naccelerate in March, while Chicago manufacturers of TV sets, \r\nfurniture and home appliances are said to be very pleased with the \r\ntrend of sales. Increases in varying degrees in orders, shipments \r\nand backlogs-often linked either to a rise in consumer demand or to \r\nstrong construction activity-are also mentioned by several other \r\nBanks, including Richmond and St. Louis. The Dallas Bank notes that \r\nthe Texas industrial production interest rose to a record level in \r\nJanuary.\nDespite the apparent strengthening of the economic recovery, \r\nDistrict reports, however, generally note that businessmen are still \r\nmaintaining cautious inventory policies at this juncture, and that \r\nno significant turnaround in such policies is indicated for the near \r\nfuture. The current inventory picture is well summed up by the \r\nresults of the latest Minneapolis Industrial Expectations Survey, \r\nwhich indicate that nearly three quarters of the responding \r\nmanufacturers considered their inventory positions to be \r\nsatisfactory, with the balance equally divided between those who \r\nconsidered their inventories too high or too low. Similar sentiments \r\nwere expressed by several other banks, although Chicago reported \r\nthat an increasing number of firms showed concern over the adequacy \r\nof their inventories to meet rising demands.\nConcerning business outlays for plant and equipment, Philadelphia \r\nreports that an increasing number of area manufacturers are planning \r\nto boost capital outlays, with firms contacted that planned \r\nincreases outnumbering those planning cut-backs 10 to 1. Atlanta \r\nreports that previously postponed capital improvements at airports \r\nand other nonresidential projects will now be implemented. Cleveland \r\nnotes that truck production and sales were at record levels, while \r\nboth the Chicago and New York Banks saw evidence of a sharp rise in \r\nagricultural capital spending. On the other hand, St. Louis notes \r\nthat capital expenditures are being delayed as long as possible, as \r\nits business respondents express reluctance to make major \r\ninvestments in view of the uncertainties surrounding profit \r\nprospects, and San Francisco reports a conservative attitude by \r\nlocal businessmen toward new capital investment.\nRegarding the unemployment picture, reports vary among the District \r\nbanks, but on balance suggest some limited improvement. Richmond \r\nthus reports sharp increases in manufacturing employment, as well as \r\na substantial rise in the trade and services industries. The \r\nPhiladelphia and New York Banks both had evidence that some firms \r\nwere adding to their payrolls, while the Dallas Bank indicated that \r\na rise in employment, notably in the construction industry, had \r\nlowered the jobless rate in the District to its lowest level in more \r\nthan a year. According to reports to the Atlanta Bank, unemployment \r\nwas \" low\" in East Tennessee, and scattered improvement was seen \r\nelsewhere in that District. There has also been some increase in \r\nemployment in the lumber industry in the San Francisco District. The \r\nCleveland Bank notes a continued small recovery into January in non-farm employment, but expects no major improvement at this time. \r\nSimilarly, Chicago notes that employers have been very cautious in \r\nincreasing their work force, and St. Louis reports that apart from \r\nsome gains in the construction and service trades, additions to \r\npayrolls are being delayed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nMarch 15, 1972\nThe views of our directors on economic conditions have not changed \r\nmuch from those expressed in the previous month: they expect a \r\nsteady expansion to continue with a concurrent reduction in \r\nunemployment. The directors were asked about the prospects for an \r\nearly acceleration of capital expenditures, and the consensus was \r\nthat a strong investment upsurge is not about to begin, but that \r\ninvestment would maintain a moderate pace.\nAlthough consumer spending and construction have provided much of \r\nthe strength behind the current expansion, some directors expect a \r\nweakening in demand from those sectors. Consumer spending certainly \r\nhas improved, but there seems to be no expectation that it will \r\nbecome much stronger. One director suggested that the improved \r\nautomobile sales in late 1971 might well be at the expense of sales \r\nin 1972. Others pointed out unfavorable factors, such as the cut in \r\ndisposable income of wage earners caused by the upward revision of \r\nthe Federal income tax withholding schedules and, in California, the \r\nimposition of withholding for the state income tax.\nAs for construction, reports of continued activity-especially in \r\nresidential construction-are tempered by concern about overbuilding. \r\nIn California, vacancy rates have begun to climb in most areas of \r\nthe state, and in time the point will be reached when financial \r\ninstitutions will be less willing to finance further projects. One \r\nrespondent expects \"substantial declines in authorizations\" by \r\nlenders within the next six months. Certain classes of \r\nnonresidential construction have been strong, for example, highway \r\nconstruction. On the other hand, high-rise commercial construction \r\nwhich had been very important last year in such cities as San \r\nFrancisco may not be maintained in 1972.\nThe current level of construction activity has stimulated the lumber \r\nindustry, particularly in Washington and Oregon. Demand for lumber \r\nand plywood has encouraged increased capital expenditures for mill \r\nexpansion and modernization as well as directly increasing \r\nemployment. Prospects for agriculture in the District continue to be \r\ngood. The end of the dock strike has allowed the movement of grain \r\nto be resumed, although the carry-over of the 1971 crop may cause \r\nproblems. Prices are expected to be good for beef and pork, and \r\nconsequently feed grain producers as well as ranchers expect a \r\nprofitable year. Sugar beet and seed grain prices are also expected \r\nto be favorable. In contrast, prospects are not so good for certain \r\nvegetable and fruit crops. The outlook for fruits for processing is \r\nunfavorable, and this is attributed by some directors to shifts in \r\npublic demand away from processed fruits. Other fruit and vegetable \r\nproducers whose crops cannot be harvested mechanically face rising \r\ncosts of labor which may not be easily passed on. Yet the demand for \r\nsome fruits, such as grapes, is rising, and there have been \r\nincreases in acreage to keep pace with demand. Despite these \r\nweaknesses, the overall prospects for District agriculture continue \r\nto be favorable.\nOn the specific question of investment intentions, the majority of \r\nour nonbank directors indicate conservative investment plans. The \r\nonly exception is in the lumber industry where, as previously noted, \r\nincreased demand has required the expansion of capacity. Certain \r\nother industries are being required to make large capital investment \r\nto meet new pollution-control standards. There are regional \r\nvariations as well. In Utah, a survey conducted by one of the banks \r\nindicated a jump in 1972 capital expenditures of about 12 percent. \r\nWith those exceptions, our bank directors confirmed the lack of \r\nmajor shifts in investment activities above the rates of recent \r\nmonths.\nIn District banking, there have been no major changes. Many banks \r\nhave cut their passbook savings rates to 4 percent even though \r\nsavings and loan associations continue to pay 5 percent, and other \r\ncommercial banks, including some relatively large banks, have \r\nmaintained the 4 1/2 percent passbook rate. Lending rates have been \r\nreduced for certain lenders and categories of loans, but the lower \r\nprice and greater availability of funds has not resulted in any \r\nresurgence of loan demand. Commercial-industrial loan demand in most \r\nstates is described as unchanged or weak. In consequence, banks have \r\nbeen more aggressive in seeking business and making rate \r\nadjustments.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1972/1972-03-kc

"Beige Book Report: Kansas City\nMarch 15, 1972\nConsumers in the Tenth District are contributing to increasing \r\neconomic activity, according to reports received from retail food \r\nchains, large department stores, automobile dealers, and banks. \r\nSales of new domestic automobiles have been generally better so far \r\nin 1972 than in the latter months of 1971. However, soft goods seem \r\nto be moving better than consumers' durables other than automobiles, \r\naccording to most department stores. Consumer credit at District \r\nbanks continues to climb, both in the form of installment loans and \r\nthe use of bank credit cards. District banks have also experienced \r\nstronger loan demand from local business borrowers in the last few \r\nweeks.\nResponse from retail sellers of nonfood items (primarily large \r\ndepartment stores) across the District indicate that, with few \r\nexceptions, sales so far in 1972 are running well ahead of a year \r\nago. There is apparently no general movement toward additional \r\ninventory building beyond what has already been budgeted for this \r\nyear. On balance, soft goods seem to be moving better than \r\nconsumers' durables. Most retailers interviewed expect 1972 to be a \r\ngood year, although a major Kansas City department store anticipates \r\nlittle sales strength until fall.\nInterviews with automobile dealers and distributors in Kansas City, \r\nDenver, Oklahoma City, and Omaha revealed that sales of new domestic \r\nautomobiles were generally better so far in 1972 than in the closing \r\nmonths of 1971 (Omaha excepted). Inventory situation reports varied, \r\ndepending on the make of car, but most dealers described their \r\ninventories as \"normal\" or \"satisfactory\". Some foreign car dealers \r\nindicated that their sales had been hurt by the New Economic Policy, \r\nespecially in the latter months of 1971, but that their positions \r\nwere improving this year.\nA number of retail food chains were surveyed for current information \r\non food sales and prices. Although the reports on sales were mixed, \r\nthe information on prices formed a consistent pattern. On balance, \r\nfood prices have not risen significantly since the lifting of the \r\nfreeze, according to those firms contacted. Nevertheless, all \r\nreported a sharp increase in the retail price of meat some as high \r\nas 25 percent. In the last month, meat prices have shown greater \r\nstability, but only because retail gross profit margins have \r\nnarrowed to unprofitably low levels. Efforts are being made to \r\nrestore profit margins to more normal levels and, unless wholesale \r\ncarcass prices fall sharply, retail meat prices may rise above \r\ncurrent levels in the coming weeks.\nThese reports tend to support the behavioral patterns of food \r\nretailers observed in the past. Typically, retail food prices \r\nneither rise nor fall in direct proportion to price changes at the \r\nfarm level; instead, changes in retail food prices tend to lag \r\nbehind those at the farm level and are also subject to less \r\nvariation. During the last two years, for example, the average price \r\nof choice slaughter steers rose about 10 percent, but the increase \r\nin the beef and veal component of the consumer price index was less \r\nthan 5 percent. Similarly, average hog prices fell nearly 20 percent \r\nover the period, but the pork consumer price index dropped only 9.5 \r\npercent. Except for two brief interruptions, farm prices have \r\nclimbed steadily since December 1970 and now average about 10 \r\npercent above a year ago. Sharply higher prices for meat animals \r\nhave been responsible for most of the 7 percent gain since last \r\nNovember as well as the recent resurgence of the wholesale price \r\nindex and consumer price index. Despite the prospects for some \r\neasing of beef and pork prices at the farm level in the weeks ahead, \r\nfurther increases in retail meat prices seem likely, given the \r\naforementioned behavioral characteristics of food merchants.\nTenth District banks have experienced stronger loan demand from \r\nlocal business borrowers in the last few weeks, although activity in \r\nnational accounts remains quite low. Construction and real estate \r\nloans for business expansion have picked up markedly in Albuquerque \r\nand Denver, while in other areas of the District, banks reported \r\nincreased inquiries for these types of loans. There are some \r\nscattered signs of a prospective increase in loans to businesses for \r\ninventory purposes, although to date these have manifested \r\nthemselves mainly as requests for larger credit lines and a more \r\noptimistic attitude noted in talks with business customers. Consumer \r\ncredit continues to climb, with the maintenance of a steady rate of\r\nincrease in installment loans and some acceleration in the use of \r\nbank credit cards.\nOne reason for the relatively poor showing of national accounts may \r\nbe the attempt of some District banks to maintain their prime rates \r\nabove the New York level. By decreased use of their credit lines and \r\nthreats to move their accounts to other banks, national customers \r\nhave forced District banks to 4 3/4 percent or 5 percent on loans \r\nmade to national borrowers. The prime rate to local borrowers \r\nremains as high as 5 1/2 percent at some banks.\nDeposit flows continue strong at District banks, as increases in \r\nsavings and consumer time deposits have more than offset seasonal \r\ndecreases in demand deposits. District banks have not lowered their \r\nconsumer time deposit rates in the last few weeks (most are still at \r\nRegulation Q ceilings). Some banks have experienced a runoff in \r\ntheir negotiable certificates of deposit, but many are adjusting \r\nrates to be able to turn over their existing stock.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"Beige Book Report: Boston\nMarch 15, 1972\nReports from our directors indicate a continuing improvement in \r\nbusiness activity. Savings flows remain unusually strong, but demand \r\nfor funds outside residential construction has not yet picked up. In \r\ngeneral, no significant price increases from suppliers were noted.\nNone of our directors indicated that their firms had either \r\nincreased employment or overtime in the past month. One bank \r\ndirector, whose bank does the payroll for area firms employing \r\n30,000 workers, stated that overtime work at these firms has been \r\nincreasing steadily during the last month.\nSavings flows in February and early March continue to be very \r\nstrong. A large Boston bank cut its rate on savings accounts over \r\n$100,000 but reports that large institutional deposits (mainly \r\nuniversities) have not slackened, since savings deposits rates are \r\nstill above short-term market rates. Demand for single-family \r\nmortgages is still excellent. A New Hampshire bank reported a 1/4 \r\npercentage point drop in mortgage rates. Within the last two to \r\nthree weeks, there has been a noticeable slowing in the demand for \r\napartments in the greater Boston area due to an oversupply, but \r\ncontractors are continuing to borrow and build. In southern New \r\nHampshire, Manchester still has an apartment shortage, but Nashua is \r\nexperiencing a \"sticky\" market. While business loan demand is \r\nreported stable, businesses are \"dusting plans from the shelf\" and \r\ncoming to Boston banks to discuss financing, but there is still \r\nlittle interest in increasing inventories.\nOur business directors indicated that new orders in 1972 have been \r\nbetter than in the fourth quarter of 1971, especially those tied to \r\nconsumer spending. Despite this, one business director indicated no \r\nplans to raise capital spending because of continuing excess \r\ncapacity, and another director indicated that recent increases in \r\ncapital spending were tied to cost increases, not larger planned \r\ncapacity.\nThe four academic respondents contacted this month, Professors \r\nEckstein, Samuelson, and Wallich and Dr. Shapiro, agreed unanimously \r\nthat the Federal Reserve should permit short rates to drift up, \r\nthough each had a different reason for doing so. Expressing some \r\nconcern over the international position of the dollar, Wallich felt \r\nthe Europeans need some evidence that we are cooperating. The recent \r\nrise in the money stock presents a good opportunity to allow an \r\n\u201cupward drift\u201d in short rates \u201cfor a short period of time\u201d. Over \r\nthe next quarter or two, Wallich would ignore the money stock as a \r\npolicy target, even if it were to shoot up considerably, and \r\nconcentrate upon interest rate behavior.\nSamuelson would encourage an \"operation twist\" policy even though it \r\nwould be limited in what it could accomplish over a long time \r\nperiod. He felt there is a serious international \"war of nerves\" \r\ngoing on and fears capital controls abroad are a dangerous \r\npossibility. At the same time, he warned that the foreign exchange \r\nproblem cannot be overcome by the amount of adjustment the United \r\nStates will be willing to make in an election year. Samuelson took \r\nan 8 percent to 9 percent rate of monetary growth as \"par\" for the \r\nyear-maybe more between now and Labor Day and less afterward. Even \r\nthen, there may be some increase in short rates. Open market \r\noperations should be used to prevent this rise from being translated \r\ninto the long end of the market. Since the middle of 1971, the \r\ndynamics of the economy have meant that following only aggregates or \r\nonly interest rates as targets would lead to unpredictable effects \r\nin the other variables. Samuelson inferred from this that one must \r\n\"look at both all of the time\".\nEckstein and Shapiro welcome a continuation of the upward drift in \r\nshort rates, which they had been expecting, since it will get short \r\nrates back in line with fundamental factors and not because of \r\ninternational considerations. Shapiro finds little evidence that \r\nshort money flows are sensitive to interest differentials rather \r\nthan to the expectation of devaluation. He argues further that the \r\nloss of short money is of little consequence. Shapiro expects short \r\nrates to continue to move up and long rates to move down more, with \r\nAA utility new issues at 6 1/2 percent to 7 percent by the year-end. \r\nShapiro thinks the Fed should continue to pursue a 5 percent to 7 \r\npercent monetary growth target but not be concerned by very large \r\ngyrations over a few months.\nEckstein's remarks focused on criticizing monetary authorities for \r\nnot supplying bank reserves more smoothly over the past six months. \r\nAfter several months of excessive stringency, the Federal Reserve \r\nresponded in December by producing excessive liquidity in the \r\nbanking system. Part of the dollar outflow stems from the huge \r\nreserve growth since December. For the present, Eckstein urged a \r\nsmooth growth in reserves with an eye toward preventing increases in \r\nlong rates. Eckstein cited a simulation experiment in which a 1 \r\npercent rise in the bond rate left the unemployment rate, a year \r\nfrom now, over 6 percent and rising.\nRespondents' views on the prospects for the economy differ. Wallich \r\nstands by his earlier estimate of an $85 billion gross national \r\nproduct (GNP) gain, and Shapiro sticks to his $100 billion forecast. \r\nUpward revisions in business fixed investment combine with cuts in \r\nconsumption, leaving Eckstein with an unchanged GNP estimate of \r\n$1,143 million for 1972.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"Beige Book Report: Minneapolis\nMarch 15, 1972\nAlthough bank directors remain optimistic about District retail \r\nspending in 1972, reports varied concerning retail sales in January \r\nand February. Business loan demand at Ninth District commercial \r\nbanks was described as steady or weak. Ninth District businessmen in \r\ngeneral were characterized by bank directors as being comfortable or \r\nsatisfied with their current inventories.\nDirectors' reports were mixed concerning retail sales in January and \r\nFebruary. The head of a large Minneapolis-based retailing firm \r\nindicated that his sales had flattened out in January and February, \r\nwhile another director reported that automobile and hard goods sales \r\nhad improved in the Twin Cities during the first two months of 1972. \r\nSevere weather was cited by two directors as restricting sales in \r\ntheir areas, but another reported that retail sales in his had \r\nmatched or exceeded earlier expectations in both January and \r\nFebruary.\nBank directors continue to anticipate that 1972 will be a good year \r\nfor consumer spending. One director was quite optimistic about \r\nretail trade in his area, and cited as evidence the fact that three \r\ngroups are considering building shopping centers there. A director \r\nfrom South Dakota indicated that his state is looking forward to a \r\nvery good tourist season this summer. One director, however, \r\nrevealed that retail sales in his area probably will not be as \r\nstrong as they were in 1971, while another does not expect retail \r\nsales growth in his area to match the projected advance in national \r\nretail spending. In addition, an economist with a large District \r\nretailer is forecasting that in 1972 national retail sales will be \r\nup 7.2 percent from a year ago, and department store sales will \r\nadvance 12.1 percent.\nBusiness loan demand at Ninth District commercial banks was \r\ndescribed by most directors as steady or weak. One director, who \r\nconsidered business loan demand in his area weak, did report a \r\nrecent pickup in consumer and real estate lending, while another \r\nattributed brisk business loan demand in his area to the fact that \r\nbusinessmen and farmers needed more money to operate this year. \r\nStill another director reported that higher livestock prices have \r\nbeen responsible for an increase in agricultural loans in his area.\nNinth District businessmen in general were characterized by bank \r\ndirectors as being comfortable or satisfied with their current \r\ninventories. These observations concur with those made by \r\nmanufacturers responding to our latest industrial expectations \r\nsurvey, as 72 percent of the respondents considered their \r\ninventories satisfactory. The remaining respondents were equally \r\ndivided, with 14 percent describing their inventories as high while \r\nthe other 14 percent considered theirs too low. Because severe \r\nweather in the northwestern part of the United States had slowed the \r\nproduction of lumber products, one director did report, however, \r\nthat suppliers of building materials in his area were concerned that \r\na shortage of building materials could develop. He also indicated \r\nthat restrictive price ceilings had discouraged manufacturers from \r\nproducing certain needed building materials.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"Beige Book Report: Richmond\nMarch 15, 1972\nResults of our most recent survey suggest that the pace of economic \r\nactivity in the District continues to advance, perhaps at an \r\nincreasing rate. Manufacturers generally report further increases in \r\nshipments, new orders, backlogs of orders, employment, and hours \r\nworked per week. Bankers and trade and services respondents indicate \r\nsubstantial improvements in sales accompanied by increases in \r\nemployment. While business loan demand continued the weakness first \r\nreported in the last survey, the demand for consumer and mortgage \r\nloans remains strong. Contact with our regular survey respondents \r\nand other businessmen fails to indicate any substantial step-up in \r\nthe rate of inventory accumulation. Respondents continue to view the \r\noutlook for future business conditions with considerable optimism.\nThe diffusion of responses of manufacturers in our latest survey \r\nindicates that strength in shipments, new orders, and backlogs of \r\norders is greater than at any other time in the last six to eight \r\nmonths. Increases are reported by important producers in such \r\nindustries as chemicals, metals, textiles, and synthetic fibers. \r\nManufacturing respondents report sharp increases in employment and \r\nhours worked per week, while trade and services respondents indicate \r\na substantial increase in employment but no change in hours worked \r\nper week. Banking respondents report that there has been little \r\nchange in employment in their areas and that available labor \r\nsupplies are moderately higher.\nGains in sales were reported by a large proportion of trade and \r\nservices respondents, and bankers indicated substantial improvement \r\nin both automobile and general retail sales. Some price increases \r\nwere reported in the trade and services areas, but the diffusion of \r\nmanufacturing responses suggests no significant changes in \r\nindustrial prices. Both groups of respondents indicated further \r\nincreases in wages paid.\nManufacturers report a slight decline in actual inventories and a \r\nmoderate increase in inventory levels relative to desired levels. \r\nTrade respondents indicate increases in both the actual level of \r\ninventories and the level of inventories relative to desired levels. \r\nConversations with representatives of several large retail outlets \r\nand manufacturers in the District suggest that no important changes \r\nin inventory policy have occurred in recent weeks nor are any \r\nplanned. A sizable number of manufacturing respondents report that \r\ncurrent capacity is less than adequate.\nIn spite of the indicated pickup in both trade and manufacturing, \r\ndemand for business loans continues soft, but bankers report good \r\nincreases in the demand for consumer and mortgage loans. According \r\nto banking respondents, both residential construction and \r\nnonresidential construction continue strong.\nOn balance, results of our survey and other contacts indicate that \r\nbusinessmen in the District continue to view business prospects with \r\noptimism. Nearly 60 percent of the banking respondents responded \r\nthat they expect an increase in business activity in the months \r\nahead.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"Beige Book Report: Atlanta\nMarch 15, 1972\nMost businessmen and bankers report stable or improving business \r\nconditions and sentiment. Confidence is distinctly stronger than it \r\nwas a year ago, yet appears to be building gradually. Reports tend \r\nto indicate that increased credit availability is having a desired \r\neffect and that economic strength is spreading to nonresidential \r\nconstruction and manufacturing, including plant and equipment \r\nspending. Retail sales and tourist expenditures are, reportedly, \r\nholding up well. Very little comment has been made about Phase Two \r\ncontrols. The areas of greatest inflationary pressure continue to be \r\nFlorida real estate and utility rates.\nAn increase in the availability of financing is evidently \r\nresponsible for an announcement of plans to begin construction on a \r\nlarge hotel in downtown Nashville later this year. This project had \r\nbeen held up earlier by high interest rates and a lender's demand \r\nfor use of the first two floors of the building. Previously \r\npostponed capital improvements at the Birmingham airport have \r\nrecently been given to go-ahead, and capital improvements will soon \r\nbegin at the New Orleans airport. Moreover, a large shopping mall is \r\nbeing planned for the Birmingham area.\nResidential construction is reported to be booming along the \r\nnortheast Florida coast, where several large condominium projects \r\nare planned or under construction. Strength continues in the Orlando \r\narea, where construction has begun on 1,600 apartment units. Disney \r\nWorld has also announced further plans for a second-home community \r\nnear Orlando. Northwest Florida also reports great strength in \r\nresidential construction. A planned unit residential complex has \r\nbeen announced for a tract north of Atlanta. Construction on this \r\nproject is expected to be completed in five to eight years.\nOur directors describe manufacturing activity in middle Tennessee as \r\n\"strong\", with one major firm working overtime, and unemployment in \r\neast Tennessee as \"very low\". The University of Tennessee reports \r\nthat the employment picture for graduates may be showing signs of \r\nimproving. During the first academic quarter, the number of \r\norganizations interviewing on campus is expected to increase to 271 \r\nfrom last year's 232. However, another director reported that, while \r\nbusiness is good in Alabama, one should not expect unemployment in \r\nmany parts of Alabama to be significantly reduced. Still, there have \r\nrecently been employment increases at scattered apparel plants in \r\nAlabama and other southeastern states. An apparel concern that has \r\nabout 8,000 employees in Alabama has recently announced major \r\ncapital expansions, including two new plants. Elsewhere, plant \r\nexpansions have been announced in meat packing, chemicals, and auto \r\nmanufacturing.\nRetail sales are generally reported to be holding up well. Tourist \r\nbusiness in Florida is booming. Disney World is in the process of \r\nhiring 1,300 youths of high-school and college age for Easter and \r\nsummer work. Ringling Brothers Circus is going to build a permanent \r\ncircus complex costing $50 million about thirty miles southwest of \r\nDisney World.\nLand speculation is reported in North central Florida, where \r\nproperty is turning over at a rapid pace and at skyrocketing prices. \r\nThe TVA has warned of a possible future electric rate increase, and \r\na Georgia power company will request higher rates later this year. \r\nCommercial bankers express concern about the profit squeeze caused \r\nby the combination of large time deposit increases and weak loan \r\ndemand, but no new reductions in time and savings deposit rates have \r\nbeen detected.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1972/1972-03-da

"Beige Book Report: Dallas\nMarch 15, 1972\nRecent indicators of economic activity suggest renewed strength in \r\nthe District economy. Industrial production in Texas increased \r\nsignificantly in January. Moreover, employment in the five District \r\nstates rose substantially, and the average unemployment rate for the \r\nregion dropped. Construction activity in Texas also increased \r\nsignificantly, and retail sales continued to show strength. However, \r\nautomobile registrations fell in January from a month before.\nThe seasonally adjusted Texas industrial production index rose to a \r\nrecord level in January, thus recovering from its slight drop in \r\nDecember. Among manufacturing industries, the most significant \r\nproduction gains in January were registered in petroleum refining \r\nand in the textile mill products, apparel products, and stone clay \r\nand glass products industries. The only industry to record a decline \r\nin January was the printing and publishing industry. The \r\nmanufacturing component of the production index has risen sharply \r\nsince last July after remaining relatively stable during the \r\npreceding eighteen months. Since mid-1971, this component has grown \r\nalmost\n7 percent.\nMining output also rebounded in January, gaining 2.3 percent over \r\nlast month. Although improvements were reported in all industry \r\ngroups, the significant gains were in natural gas liquids and crude \r\npetroleum mining. Contrary to the trend in manufacturing, the mining \r\nsector has fallen significantly from year-ago levels as this month's \r\noutput was 2.9 percent behind that of January 1971. Output of \r\nutilities fell slightly in January but was still well ahead of its \r\nlevel a year earlier. The Texas oil allowable was raised for the \r\nmonth of March to a level 86.0 percent of capacity. This is the \r\nfourth consecutive monthly increase, reversing the steady downward \r\npattern of allowable which existed for the first eleven months of \r\n1971. No other District state changed its allowable in March.\nTotal employment seasonally adjusted in the five southwestern states \r\nrose a significant 1.3 percent in January. With this rise in \r\nemployment, the average unemployment rate for these states dropped \r\nto 4.5 percent from 4.8 percent in December. The January jobless \r\nrate was the lowest in more than a year. Nonfarm payroll employment \r\nin the five-state region also increased significantly in January, \r\nwith the service industries being the only major industry group to \r\nshow a decline from December. The largest employment increase was \r\nreported in the construction industry.\nConstruction activity in the five southwestern states-as measured by \r\nthe value of contracts awarded-increased significantly in January, \r\nwith the increase occurring mainly in Texas. Except for Arizona, all \r\nother District states reported reductions from December. All three \r\nmajor categories of construction shared in the monthly gain, but \r\nresidential building continued to show the greatest strength. The \r\ntotal value of contracts in the five-state region in January was \r\nmore than half again greater than its level a year ago.\nSales of department stores in the District continued to show year-to-year gains in January, with Houston reporting the largest \r\nincrease. New automobile registrations on the other hand continued \r\nto fall, with Dallas, Forth Worth, and Houston all reporting \r\ndeclines of about 25 percent from December. However, registrations \r\nwere still substantially above their levels of a year ago.\nDistrict agriculture is progressing well. Wheat is making good \r\ngrowth over the District, although lack of moisture is becoming a \r\nlimiting factor on dryland wheat. Cotton planting is making \r\nexcellent progress in south Texas where soil and moisture conditions \r\nare generally good. Corn and sorghum planting is also making good \r\nprogress, and the winter vegetable harvest continues active with \r\nfavorable weather conditions prevailing. Range and livestock \r\nconditions declined slightly in January but remain well above levels \r\nof a year ago and are moderately above the ten-year average. There \r\nwere 1.8 million head of cattle on feed in Texas on February 1, or \r\n16 percent more than a year before. In Arizona, cattle on feed \r\ntotaled slightly more than one-half million head, 4 percent larger \r\nthan a year earlier.\nThe index of prices received by Texas farmers and ranchers \r\nregistered a 2 percent gain in the month ended February 15, 1972 and \r\nwas 21 percent higher than the level a year earlier. Most livestock \r\nand livestock product prices were up from both a month and a year \r\nago. Crop prices generally declined from mid-January to mid-February \r\nbut still averaged 20 percent higher than the year before.\nDirector sentiment still favors a slow to moderate growth in the \r\neconomy, though reports hint at the beginnings of inventory \r\naccumulation, stronger retail sales, and heavier capital spending by \r\nbusiness especially for pollution control. Phase Two is \r\ncharacterized by our directors as modestly successful in its \r\npsychological impact but of questionable long-range-control \r\neffectiveness.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1972/1972-03-ch

"Beige Book Report: Chicago\nMarch 15, 1972\nThe likelihood of a gradual uptrend in total business activity for \r\nthe remainder of 1972 is widely accepted in this District. However, \r\nmost analysts in the region who attempt to estimate economic \r\naggregates foresee a rise of $80 billion to $90 billion, at most, in \r\ngross national product (GNP) for 1972 over 1971. Fears of a \r\nresurgence of price inflation are widespread. Employers are greatly \r\nconcerned over productivity and union opposition to work-rule \r\nchanges. Consumers continue to add to liquid savings at a high rate. \r\nRetail sales of durables are much more vigorous than sales of \r\nnondurables. Orders and output for most types of capital equipment \r\nare either vigorous or improving moderately. More companies are \r\nconcerned about whether inventories of components and finished goods \r\nare adequate to take full advantage of a more pronounced uptrend in \r\ndemands. Nonresidential construction of most types apparently will \r\nrise this year, while residential construction, although continuing \r\nat very high levels, is expected to slow down gradually. With an \r\nample supply of funds, lenders are again seeking to make certain \r\ntypes of loans that they deemphasized in the late 1960's.\nThe uptrend in employment in recent months appears to have been less \r\nvigorous in the Seventh District than in the nation. Employers have \r\nbeen very cautious in increasing staff. With rising output, \r\nspectacular increases in productivity are occurring in some \r\nindustries. One major airline is handling about 10 percent more \r\ntraffic than a year ago with about 10 percent fewer employees. Jobs \r\nremain \"hard to get\", in almost all areas of the District, certainly \r\nby comparison with 1969. Employers usually are able to choose \r\nbetween a large number of applicants and can apply higher standards. \r\nAt the same time, large employers are subject to pressures to avoid \r\nusing hiring standards that may be judged to discriminate against \r\nminority groups.\nMakers of furniture, appliances, and TV sets continue to be very \r\npleased with the trend of orders and sales. Inventories are said to \r\nbe in good shape. The main increase in inventories since last year \r\nhas been at the distributor level, a development that is viewed as \r\ndesirable.\nRetailers we know report sales of nondurables are lagging sales of \r\ndurables. But it is very difficult to get an adequate reading on \r\nretail sales by type or region, partly because companies are \r\nsecretive and partly because the fortunes of particular chains and \r\nindividual stores are shifting year by year. The completion of large \r\nnew shopping centers, the introduction of seven-day shopping weeks, \r\nand the changing character of certain retailers\u2014product lines, \r\nlocations, merchandising techniques, etc.\u2014keeps the picture in a \r\nstate of flux and reduces the value of reports from a fixed group of \r\nstores, even if reports are current and accurate.\nWhile it is often said that consumers are \"cautious\", \"buying what \r\nthey need\", etc., there is much contrary evidence. Perhaps the most \r\nvigorous component of the consumer goods field is recreational \r\nvehicles-motorcycles, golf carts, snowmobiles, and motor homes \r\n(called \"expensive toys\" by a prominent District producer). \r\nProduction of most of these goods has been at or near capacity.\nThe improvement in capital goods continues to be spotty, with heavy \r\ntrucks the star performer. Sales of some types of farm and \r\nconstruction equipment ate far above last year's rate. None of the \r\ncapital goods producers are reporting further declines in orders, \r\nbut complaints about the lack of a vigorous uptrend are common.\nSteel orders and shipments are now improving in a steady fashion in \r\nplace of the \"sputtering\" uptrend noted earlier in the year. Some \r\nsteel users are believed to have reduced stocks excessively and are \r\nnow reversing the process. Steel demand from producers of motor \r\nvehicles, other consumer durables, construction, and shipbuilding is \r\ngood. Demand for steel for bridges, highway projects, pipelines, and \r\nrailroad equipment is still slow.\nA District chemical company with a broad product line reports that \r\norders are strong for most lines and that the market has a much \r\nbetter \"tone\" than a few months ago.\nHousing experts expect a gradual decline in starts, seasonally \r\nadjusted, as the year goes on. First, vacancy rates are rising, \r\nespecially for high-priced homes and apartments. Second, reports of \r\nshoddy construction, charges of dishonest Federal Housing \r\nAdministration appraisals, and sharp increases in foreclosures in \r\nthe central areas of some large cities (especially Detroit) may \r\ncause some home buyers and lenders to be more hesitant in making \r\ncommitments.\nBanks and other lenders are actively seeking borrowers. Business \r\nloan demand at large banks continues very weak. Some banks are \r\nincreasing real estate loans and purchases of consumer installment \r\npaper. Some life insurance companies are returning to the farm \r\nmortgage field. Savings and loan associations are becoming active in \r\nfinancing mobile homes. With savings inflows continuously very \r\nstrong, some large banks are no longer offering consumer \r\ncertificates of deposit (CDs) at premium rates, and bank executives \r\nare outspoken about their desire to cut the passbook savings rate if \r\ncompetition would permit. On the other hand, a very large bank is \r\nnow offering longer maturity CDs (up to four years) at graduated \r\nrates (up to 6 1/4 percent).\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1972/1972-03-sl

"Beige Book Report: St Louis\nMarch 15, 1972\nBusiness activity in the Eighth Federal Reserve District continues \r\nto increase moderately. According to a survey of leading \r\nbusinessmen, the uptrend in construction activity established last \r\nyear is apparently being maintained. Retail sales at larger \r\ndepartment stores are running somewhat ahead of a year earlier, and \r\nfactory orders continue to improve moderately. Demand for \r\ntransportation services is rising. The agricultural sector is quite \r\noptimistic as a result of recent price increases for a number of \r\nmajor farm products. Some businessmen, however, expressed doubt that \r\nthe rosy projection of a $100 billion gain in gross national product \r\n(GNP) will be achieved. They point to the reluctance of businesses \r\nto make major investments in view of expected moderate profit \r\nlevels. Furthermore, few report increased employment or intentions \r\nto hire additional personnel. Savings at financial agencies remain \r\nat high levels, and interest rates on mortgages are receding.\nWith the construction industry leading the way, business activity \r\ncontinues the moderate uptrend established in late 1970. Suppliers \r\nof new building materials and new household equipment report rising \r\nsales. Expenditures for improvements on older buildings are likewise \r\nincreasing.\nFarm income prospects have improved substantially in recent months, \r\nand farmers are spending more on production items. Sales of farm \r\nproduction supplies, especially chemicals, are running well ahead of \r\nyear-ago levels.\nAirlines travel continues the sharp uptrend which began in the \r\nfourth quarter of last year. With the relatively narrow margin \r\nbetween use and capacity, the gains point to an early increase in \r\npassenger plane production.\nRetail sales are running ahead of year-ago levels at most stores and \r\nsomewhat ahead of the amounts budgeted. Major retailers in the area, \r\nhowever, do not believe that this will be one of their better profit \r\nyears. They report increasing difficulty in showing a profit at \r\nlarge downtown stores, where their volume of business is usually \r\ngreatest. The large chains report that all of their gains are coming \r\nfrom outlying branch stores.\nDespite the gains in factory orders and retail sales, new \r\ninvestments and additions to payrolls are being delayed as long as \r\npossible. Major manufacturing firms report that nothing has occurred \r\nto date to merit an increase in their investment plans. One official \r\nreported that he could see nothing more than a very moderate \r\nuptrend, with some increase in profits resulting from stringent cost \r\ncutting. There were a few reports of increases in expenditures for \r\nlabor-saving equipment and plant modernization, but none reported \r\nmajor plans for increasing overall capacity. Two retailers reported \r\nsome new investments in outlying stores, but both indicated excess \r\ncapacity in some older establishments.\nIt is difficult to find a major manufacturing firm that admits to an \r\nexpansion of its work force. Some have changed the composition of \r\ntheir work force, adding engineers and reducing manual laborers and \r\nvice versa, and occasionally one will report rehiring some employees \r\nwho were laid off earlier. The interviews thus confirm the \r\nstatistical reports that the employment gains have occurred almost \r\nentirely in services trades and in construction.\nFinancial agencies report that inflows of savings continue at a high \r\nrate, and withdrawals are below average. Negotiated rates paid on \r\nlarge savings accounts are down somewhat. Maximum permissible rates \r\nare still being paid on most regular savings accounts by the savings \r\nand loan associations, but some commercial banks have reduced their \r\nrates paid from the maximum permissible levels. Loan volume \r\ncontinues to rise moderately, but interest rates on mortgages have \r\nreceded somewhat in recent weeks. Some conventional mortgage loans \r\nof up to 80 percent of the purchase price are being made at a 7 \r\npercent rate, and some loans up to 67 percent of the purchase price \r\nare made at a 6.75 percent rate.\nThese rates are down from 7.25 \r\npercent and 7 percent, respectively, since the first of the year.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1972/1972-03-ph

"Beige Book Report: Philadelphia\nMarch 15, 1972\nEconomic conditions in the Third District continue to show some \r\nsigns of strength and optimism. Area manufacturers report further \r\npickup in new orders and shipments during February along with added \r\nemployees on the work rolls. The increased activity is expected to \r\ncontinue at least through the next six months. Plans for capital \r\nexpenditures are strengthening as well. Bank loan demand remains \r\nsluggish but increased activity is expected in the next two months. \r\nRetailers find the consumer is still bargain hunting, but they also \r\nexpect more activity in the near future. Prices in the manufacturing \r\nsector seem to be under less pressure and the near-term outlook is \r\nfor more of the same.\nDistrict manufacturers polled in this Bank's monthly business \r\noutlook survey reported a continuation of the increased economic \r\nactivity experienced in January. Over a third of the respondents \r\nreported increases in new orders and shipments for February, while \r\nmore than 13 percent added employees. Also during February, the \r\naverage employee workweek was increased by 13 percent of the firms. \r\nThis pickup is expected to accelerate in March. Over 45 percent \r\nexpect increases in new orders and shipments, and nearly 18 percent \r\nplan to add employees.\nMoreover, the area manufacturers remain optimistic about the longer \r\nrun future of the regional economy. Three out of four foresee an \r\nincrease in general business activity at least through the next six \r\nmonths, and two thirds of the respondents expect new orders and \r\nshipments in their own firms to be rising six months from now. An \r\nincreasing number of area manufacturers also are planning to boost \r\ncapital outlays. The proportion of firms intending to increase \r\ncapital expenditures outstrips those planning cutbacks by a margin \r\nof over 10 to 1\u2014the highest in over two years.\nEncouraging signs are appearing on the price front as well. Over \r\nthree fourths of the responding manufacturers reported prices were \r\nsteady during February, and the same number expects them to be \r\nunchanged in March. Furthermore, the proportion of manufacturers \r\nanticipating price increases for March was about half the level of \r\nthose that predicted increases for February.\nArea bankers report sluggish loan demand but expect at least a \r\nseasonal pickup in the next few months. A representative of one \r\nlarge Philadelphia bank noted a decided change in tone among area \r\nbusinessmen. He believes that businessmen are finally convinced the \r\nrecovery is for real, and he thus expects loan demand will be rising \r\nby the end of April. One banker on the board of directors expressed \r\nseveral concerns of small bankers. He noted they are currently \r\nworried about declining deposit activity, especially in the wake of \r\ndeposit rate cuts. In addition, lack of loan demand has caused many \r\nsmall banks to become rather liquid and thus threaten bank profits. \r\nAs an example, he cited some banks that have 20 percent to 25 \r\npercent of their assets in Federal funds.\nOn the retail front, area business economists report some strength \r\nin autos but little encouragement elsewhere. Department store sales \r\nhave shown little improvement over the last month. One store \r\nrepresentative says the consumer is still bargain hunting but \r\nreacting to both price and quality. He cited that budget store sales \r\nhave been in the doldrums for many months. Customers wait for sale \r\nprices on regular items rather than settle for budget items. \r\nRetailers are expecting some help, however, from the spring weather.\nAlso, home furnishings are expected to be strong as a result of \r\nhousing completions in the area.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1972/1972-03-ny

"Beige Book Report: New York\nMarch 15, 1972\nA moderately more optimistic picture of the economic outlook, as \r\ncompared to last month, emerged from opinions expressed by the \r\ndirectors of the New York Bank and the Buffalo branch, and other \r\nbusinessmen. Consumer spending appears to have strengthened \r\nsomewhat, while business confidence was reported to have improved \r\nmoderately. The unemployment situation continues unsatisfactory, but \r\nis apparently a little better than earlier in the year.\nConsumer spending, which for the retail industry as a whole had been \r\nrelatively sluggish in February, seems to have quickened in the very \r\nrecent past, with scattered indications of increased sales of higher \r\npriced items. Among the directors, a senior official of the largest \r\nupstate firm felt that the underlying trend of consumer spending has \r\ncontinued to improve, and saw evidence of increased consumer \r\nwillingness to trade-up in the strong sales of his firm's new movie \r\ncameras. A head-office director referred to an across-the-board rise \r\nin airline travel and to a \"dramatic\" increase in domestic \r\ntelevision sets sales, while another director, an upstate \r\nbusinessman, noted that, in his area, sales of higher priced \r\nautomobiles were rising more rapidly than those of cheaper models. \r\nNevertheless, most of the directors at both the head office and the \r\nBuffalo branch, did not discern any fundamental changes in \r\nconsumers' attitudes as yet. Among the retailers contacted, an \r\nofficial of a high-price and high-quality New York City department \r\nstore with branches in the suburbs reported that, following a rather \r\nsluggish performance earlier in the year, sales by his firm had \r\npicked up noticeably so far in March, and while he remained \r\ncautious, he felt that 1972 would be a good year for his firm. \r\nSimilarly, the vice-president of a large nationwide chain of \r\ndepartment stores reported a strengthening in consumer demand at his \r\nfirm's stores in the recent past and, notwithstanding the rather \r\nslow start earlier this year, looked for a significantly better \r\nretail sales performance in 1972 as compared to 1971-both for his \r\nfirm and the retail trade industry in general. Finally, an official \r\nof a medium-price retail store chain, which has experienced a \r\ngradual increase in business since last fall, stated that he expects \r\nthis trend to continue and noted that in the past month there had \r\nbeen a significant increase in his firm's sale of big-ticket items \r\nsuch as furniture and home appliances.\nAlso encouraging was a report of some firming in business \r\nconfidence. Among the Buffalo branch directors, the president of a \r\nRochester bank traced this strengthening to the \"slightly better\" \r\nprofit outlook, while the chairman of the board of a Buffalo bank \r\nfelt that the recent stock market strength mirrored an improved \r\nmood; he also reported some pickup in machine tool orders in recent \r\nmonths. In addition, another upstate banker pointed to the \r\nrelatively \"ambitious\" capital spending plans in his area, while a \r\nsenior official of a food processing company pointed to a recent \r\nsharp rise in farmers' borrowings from agricultural financial \r\ninstitutions which he felt reflected a significant increase in \r\nfarmers' capital spending. Among the head-office directors: the \r\nchairman of a large New York City bank stated that there had been \r\n\"some general improvement\" in business confidence, an upstate banker \r\nsaw signs of willingness to spend on plant and equipment, while a \r\nNew Jersey and an upstate New York banker both felt there had been a \r\nmodest improvement in business confidence in their areas. However, \r\nat a meeting of business leaders held at this Bank, a senior \r\nofficial of a large nationwide conglomerate stated that while he \r\nlooked for a rise in capital spending in certain industries, other \r\nsectors such as the space and aircraft industries would not likely \r\nincrease such outlays. He also noted that most manufacturers are \"a \r\nbit wary\" and more reluctant than in the mid-1960s to embark upon \r\nlarge-scale capital outlays. As in previous months, some businessmen \r\nfelt that most of the capital outlays would be largely limited to \r\nenvironmental control purposes.\nThere was some evidence at this time of an upturn in inventory \r\noutlays. The president of a large metal processing corporation \r\nreported some inventory buildup in the metal industry, but primarily \r\nas a hedge against expected price increases in copper. Another \r\ndirector referred to a rebuilding of inventories in computer related \r\nlines. The retailers that were contacted, however, all reported that \r\nwhile their firms were increasing inventories somewhat in view of \r\ntheir expectations of increased sales, such outlays were being kept \r\nunder tight control. The current inventory outlook was perhaps best \r\nsummed up at the Buffalo branch directors' meeting where it was \r\nnoted that businesses had \"learned to live\" with lower inventories, \r\nand are becoming less concerned about the occurrence of \"stock-outs\".\nAlthough the respondents saw no dramatic changes in labor market \r\nconditions over the past month, there were no further reports of \r\ncost-cutting layoffs and in fact several respondents saw some \r\nstrengthening in the demand for labor, particularly skilled workers. \r\nSome improvement thus was noted in the Rochester area, while a \r\nsenior official of the largest upstate firm observed that \r\nunemployment rates for experienced workers were trending down. The \r\nNew Jersey banker stated that there had been a \"fair\" improvement in \r\nthe job market in his area, and that it was harder to get qualified \r\nworkers. A similar sentiment regarding skilled workers had also been \r\nexpressed by a senior official of the country's largest \r\ncommunication firm. Finally a director reported that his company's \r\nefforts to improve productivity through reductions in production \r\nworkers had been ''somewhat overdone'' and that his firm was now \r\nincreasing its work force by a few hundred workers. On the other \r\nhand, a number of respondents looked for little change in the \r\nunemployment picture in the near future. The official of the large \r\nmanufacturing conglomerate did not expect a quick rebound in \r\nmanufacturing employment, while the chairman of a large department \r\nstore chain expressed the belief that unemployment benefits and high \r\nwelfare payments are \u201cgeared to keep the unemployment rate high\u201d.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1972/1972-03-cl

"Beige Book Report: Cleveland\nMarch 15, 1972\nMost of the developments in the District point toward a firming of \r\nthe current economic recovery. New orders and producers' backlogs in \r\nmanufacturing are still rising and are expected to show further \r\ngains in March. Nonfarm payroll employment continues to rise, \r\nalthough the insured unemployment rate leveled off in February after \r\nhaving declined for several months. The steel inventory liquidation \r\nis largely completed, suggesting a continued recovery in output and \r\nshipments in that industry. Some of our directors believe, however, \r\nthat increases in manufacturing industry payrolls in the near term \r\nwill be quite modest. Finally, several Pittsburgh banks lowered \r\npassbook savings rates, reflecting an unfavorable spread between \r\ndeposit rates and loan rates.\nNonfarm payroll employment continued its small recovery into \r\nJanuary. The District's insured unemployment rate, which has been \r\ndeclining since last September, leveled off in February, however. \r\nMost major metropolitan areas in the District are beginning to show \r\nsigns of recovery, but continued unemployment problems are reflected \r\nin the addition of Wheeling, West Virginia, and Pittsburgh, \r\nPennsylvania, in February to the list of areas with substantial \r\nunemployment. Although some industrial directors have reported \r\nrecalls of workers, numerous layoffs and some plant closings have \r\nbeen reported, indicating that the employment turnaround is of \r\nmodest proportions. Several directors foresee strong sales gains in \r\nthe period ahead, but in general they have indicated that there will \r\nbe no major employment additions in their plants.\nConsumer steel inventories declined at the end of January to year-\r\nago levels, suggesting near completion of inventory liquidation. \r\nSteel output rose strongly in February and is expected to increase \r\nagain in March. Reporting steel companies indicated that new orders \r\nare strong, with the exception of certain types of construction \r\nsteels. There were slight increases in both the production and sales \r\nof domestic new cars in February, and further small gains are \r\nexpected for March. Truck production is running at maximum capacity, \r\nand February truck sales were at a record monthly high level.\nReports from directors indicate the pace of business for firms \r\nsupplying products to the construction industry is excellent. \r\nComments on the machine tool industry ranged from \"dismal in \r\nFebruary\" to more optimistic comments of general recovery. Two \r\ndirectors mentioned rising orders in steel and office machines; \r\nhowever, they also expressed the view that employment gains would be \r\nlimited.\nOur latest survey shows that the District's manufacturing sector \r\ncontinued to show clear-cut signs of recovery in February, with \r\nfaster than anticipated increases in new orders, shipments, \r\nbacklogs, and labor utilization. On the other hand, there is little \r\nto suggest any sizable pickup in the rate of inventory buildup. The \r\navailable evidence on inventories suggests that inventory \r\naccumulation has not yet turned around. Firms expect the upward pace \r\nof manufacturing activity to continue in March, with large gains in \r\nnew orders.\nDistrict bankers have continued to talk about the unfavorable margin \r\nbetween deposit rates and rates on loans and securities. This has \r\nbeen coupled with an expectation that business loan demand will not \r\nrevive until sometime in the second quarter. As a reflection of \r\nthese concerns, several large Pittsburgh banks cut their passbook \r\nsavings deposit rate from 4 1/2 percent to 4 percent on March 1 and \r\nextended the maturity structure of rates. Stated mortgage rates were \r\nalso reduced (the base rate on conventional loans is now 6 3/4 \r\npercent). It is too soon to determine whether the pressures of these \r\ncombined moves will induce mutual savings banks and savings and loan \r\nassociations to follow.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1972/1972-02-kc

"Beige Book Report: Kansas City\nFebruary 9, 1972\nPhase II policies, and competitive market forces operating in an \r\neconomy performing well below its potential, are apparently \r\ncombining to moderate the pace of rising prices. A survey of \r\npurchasing agents and managers in the Tenth District indicates that \r\nthey perceive (1) a somewhat slower rate of price rise for materials \r\nthey purchase, (2) generally good compliance by vendors with Phase \r\nII guidelines, and (3) the existence of market forces also acting to \r\nrestrain price increases. Inventory policy is quite conservative, \r\nwith little buildup of stocks now anticipated, almost regardless of \r\nindustry. Among District banks, consumer installment lending and \r\nagricultural loan demand remain strong, while local business loan \r\ndemand has shown little change in recent weeks from its basically \r\nweak position.\nThe view from the desks of purchasing managers in the Tenth District \r\nseems to be favorable to Phase II, with overall understanding and \r\ncompliance felt to be generally good. Specific comments suggest \r\nthat, as far as purchasing agents are concerned, vendors generally \r\nappear to be following the Phase II guidelines. Purchasing agents \r\nfor a number of firms regularly review suppliers' prices for \r\ncompliance, some require invoices to be stamped as in accordance \r\nwith Price Commission rulings, and others report that notices of \r\nprice rises are accompanied with word that they have been cleared \r\nwith the Price Commission. Yet increasing prices continue to\r\ndominate the scene as the purchasing managers see it. Although they \r\nmay report that they see no evidence of unauthorized price \r\nincreases, there is also some muted criticism of extensive price \r\nrises that have received approval from the Price Commission. \r\nFinally, it should be noted that several purchasing managers expect \r\nfurther significant price increases in the months ahead.\nThere is, however, evidence of a positive influence of competition \r\nin restraining price increases. Although some purchasing agents have \r\nreceived \"feelers\" from vendors for price increases, these have \r\noften been withdrawn following challenge by the buyers. Other \r\npurchasing agents report that cash discounts are now somewhat more \r\nreadily available than in 1971. With market conditions apparently \r\ntending to moderate the upward movement of prices, the overall \r\nsituation (as given by the results of this survey) may be summarized \r\nin the comment from one purchasing manager: on balance, prices show \r\n\"an inching forward (but) not the mass increases of a year ago.\" \r\nThere are, of course, significant exceptions such as textiles (both \r\ncotton and rayon) whose rapidly rising prices were noted by two \r\nfirms that are heavy users of textiles.\nReports are mixed concerning the nonprice conditions surrounding the \r\nsale of materials. Some individual buyers note that suppliers have \r\nmaintained their services and have made no attempt to modify their \r\ncontract terms. However, many suppliers now are often cautious about \r\nquoting prices very far into the future, and unwilling to enter into \r\nyearly contracts.\nThe continued performance of the economy below its potential is \r\nreflected in the widespread absence of delivery problems across \r\nseveral very different kinds of industries. At the same time, \r\nvirtually none of the firms interviewed expect at this time to add \r\nsubstantially to inventories except on a seasonal basis. Major users \r\nof metals report they are still working down substantial carryovers \r\nof steel inventories. Reports of further inventory reductions, and \r\nno inventory buildup\u2014sometimes in spite of increased sales \r\nexpectations\u2014came from a number of firms in widely disparate \r\nindustries such as electrical cable and wiring manufacturing, sewage \r\ntreatment equipment, metal building manufacturing, pesticide \r\nproduction, rubber belting makers, private aircraft manufacturing, \r\nand a large chain of drug-and-sundries stores. All in all, inventory \r\npolicies are expected to be ''conservative this year.\"\nThe decline in the prime rate at New York banks has not been fully \r\nreflected in the lending rates of Tenth District banks. Of \r\nnecessity, most banks must follow the New York prime movements on \r\nthe accounts of their national customers. However, many District \r\nbanks have established, or are attempting to establish, a \"local\" \r\nprime for their large regional borrowers. This rate is not only \r\nhigher than the national rate, but has not been dropping as rapidly. \r\nThose banks that have not adopted this tactic are simply making \r\nfewer loans at prime.\nConsumer loan rates have not been adjusted downward at all in most \r\nbanks, and only moderately at the others.\nLocal business loan demand has not changed significantly in recent \r\nweeks from its basically weak position. Several banks report a \r\nslackening in the use of credit lines by national companies. Local \r\nreal estate loan demand is showing some signs of tapering off, but \r\nremains strong. Especially strong agricultural loan demands have \r\nbeen experienced by Omaha, Denver, and Kansas City banks. Consumer \r\ninstallment lending continues at a high level.\nAn accelerated inflow of time deposits was noted by most area \r\nbankers. Several banks have suspended issuing consumer CD's beyond \r\nsix months or a year, but this has not deterred the buildup of \r\nconsumer time and savings deposits. Flows into large certificates of \r\ndeposit have also picked up.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1972/1972-02-mi

"Beige Book Report: Minneapolis\nFebruary 9, 1972\nAccording to bank directors, District commercial loan rates have \r\nfallen in response to cuts in the prime interest rate while consumer \r\nand mortgage interest rates have declined slightly, if at all. \r\nCompetition from savings and loan associations has prohibited \r\nDistrict commercial banks from lowering their consumer savings \r\nrates. Although the outlook for non-residential construction is \r\nmixed, District residential construction in 1972 is expected to \r\nequal if not exceed 1971's record level. An expansion in District \r\nemployment is not foreseen by bank directors. District manufacturers \r\nforesee their sales improving during the first three quarters of \r\n1972.\nThe directors reported that commercial loan rates have fallen in the \r\nDistrict in response to recent declines in the prime interest rate, \r\nbut little change has occurred in mortgage and consumer interest \r\nrates. The decline in commercial loan rates has taken place \r\nprimarily at the District's large urban banks, as loan rates have \r\neither remained the same or declined only slightly at rural banks. \r\nAs a result of strong competition from production credit \r\nassociations, one director reported that commercial banks in his \r\narea have slightly reduced the price of agricultural credit. Another \r\ndirector reported that public awareness of declines in the prime \r\ninterest rate have forced banks in his area to make modest \r\nreductions in their mortgage rates.\nCompetition from savings and loan associations has prohibited \r\nDistrict commercial banks from lowering their consumer savings \r\nrates. A Montana director indicated that savings and loan \r\nassociations in his state would like to lower their savings rates, \r\nbut fear out-state competition.\nDistrict housing unit authorizations reached an all-time high of \r\n39,000 units in 1971, and District bank directors generally felt \r\nthat residential construction in 1972 will at least equal 1971's \r\nrecord level. One director revealed that banks in his area now have \r\nmore mortgage applications than they can handle. Some directors, \r\nhowever, did express some doubts about homebuilding matching 1971's \r\nperformance in their local areas. In the Minneapolis/St. Paul \r\nmetropolitan area some overbuilding of apartments may have occurred. \r\nThe FHA has temporarily suspended guaranteeing apartment financing \r\nin one portion of the metropolitan area and an FHA official reported \r\nthat apartment construction may have exceeded growth in demand in \r\nother portions of the twin cities metropolitan area.\nIn contrast to the directors' generally favorable outlook for \r\nresidential construction, their prospects for nonresidential \r\nconstruction varied. In some areas of the District noticeable gains \r\nare expected, but no improvement is foreseen in others. The outlook \r\nfor commercial/industrial construction in the Minneapolis/St. Paul \r\nmetropolitan area was characterized as weak.\nEmployment in the District has not advanced during the past year, \r\nand, in general, no increase is foreseen by bank directors. In \r\nnortheastern Minnesota, U. S. Steel's announcement that it is \r\npermanently closing the hot side of its steel plant in Duluth has \r\ncost that city 1,600 jobs. Part of the Air Force base at Duluth may \r\nalso be closed down. Smaller crop planting due to the new acreage \r\ndiversion program will probably reduce the summer demand for farm \r\nlabor in South Dakota. The Anaconda Company's decision to close its \r\nzinc operations will cost Montana approximately 700 jobs, and the \r\ncopper smelting facilities at Helena may be closed if state Board of \r\nHealth pollution standards are not met.\nSeveral directors did report some encouraging developments, however. \r\nThe construction of Cleveland Cliffs' new iron mine and pelletizing \r\nplant in upper Michigan will stimulate that area's economy. Also, \r\nMount Rushmore's designation as part of the bicentennial celebration \r\nis expected to boost tourist spending this summer in South Dakota. \r\nIn Montana, the construction of the AEM missile site at Great Falls \r\nmay help offset some of the decline in other sectors of that state's \r\neconomy.\nAccording to the preliminary results of our fourth quarter \r\nindustrial expectations survey, District manufacturers continue to \r\nexpect that their sales growth will improve during the first three \r\nquarters of 1972. District manufacturing sales are expected to \r\nsurpass year earlier levels by around 7.5 percent during the first \r\nnine months of 1972 after advancing 6.6 percent in the fourth \r\nquarter of 1971. The current sales predictions are very close to \r\nthose made for their respective quarters in the last two surveys.\nThe optimistic outlook for District manufacturing sales can be \r\nattributed to a rejuvenation in durable goods sales. In the fourth \r\nquarter, District durable goods sales exceeded earlier levels by \r\n10.1 percent, its strongest year-to-year advance in two years. \r\nDistrict durable goods manufacturers expect to maintain this rate of \r\ngain during the first three quarters of 1972. Much of this expected \r\nimprovement can be traced to the District's lumber and wood \r\nproducts, electric and nonelectric machinery and scientific \r\ninstruments industries. No significant increase in the rate of sales \r\ngain is foreseen by District nondurable goods manufacturers.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1972/1972-02-sl

"Beige Book Report: St Louis\nFebruary 9, 1972\nLeading businessmen in the Eighth District continue to view business \r\nprospects for the months ahead with optimism. They report that \r\nactivity is now expanding on a broad front. Construction on a \r\nseasonally adjusted basis and sales of building supplies and home \r\nfurnishings continue the uptrends established last year. Factory \r\noutput is approaching capacity levels for some industries. The \r\nhotel, restaurant, and airlines businesses are rising. Most \r\nmanagements, however, continue to hold the line on number of \r\nemployees and plant capacity. They report that new investments are \r\nlargely on labor-saving machinery and equipment. Savings are \r\nplentiful at current interest rates, and some reductions in mortgage \r\nrates are expected by early spring. Counter to the general trend was \r\nthe relatively low volume of department store sales in January.\nConstruction activity continues at very promising levels, and the \r\noutlook is for a good year, especially for residential construction. \r\nSome builders who dropped out of the business in 1970 are now coming \r\nback into production. Along with the rise in building has been a \r\npickup in sales of building materials, home furnishings, appliances, \r\nand all types of controls for appliances, heating, and air \r\nconditioning equipment.\nManufacturing firms have taken up much of their slack in operating \r\ncapacity. One firm in the paperboard and packaging industry was \r\nreported to be operating at 95 percent capacity. Another in the \r\nhydro-air-engineering business was reported to be operating at \r\ncapacity. Others indicated that much of the slack had been taken up \r\nand that any further gains in output would require additional \r\nexpenditure on more efficient equipment or new plant capacity.\nDespite the higher operating to capacity ratios in manufacturing, \r\nsluggish capital goods expenditures are reported. One businessman \r\nreported that profit margins are still insufficient to provide an \r\nincentive for major capital expenditures.\nEmployment is likewise being held at a minimum in the manufacturing \r\nsector. Of those interviewed, few reported any increase in their \r\nlabor force. No additional layoffs are in prospect, but there is \r\napparently greater than normal substitution of labor-saving devices \r\nfor manpower as the economic upswing gathers momentum. Some \r\nreporters indicate that manpower will be added only when large \r\nbacklogs of orders develop.\nThe extent of the recovery is indicated by the pickup in the service \r\nindustries such as the restaurant, hotel, motel, and airlines \r\nbusiness. While slack in these areas is being removed rapidly, they \r\nare not ready to place orders for additional equipment or \r\nfacilities. This hesitancy may be critical in the case of new \r\naircraft where orders must be placed two years ahead of delivery.\nOn the financial front, savings continue at a high level. Rates paid \r\nsavers are generally unchanged but are a little lower at a few \r\ninstitutions. Downward pressure is beginning to develop in mortgage \r\nrates. To date, however, mortgage rates have remained sticky, and \r\nfew reductions have been announced.\nThe agricultural industry is quite optimistic. Cotton supplies are \r\nshort and prices relatively high. Soybean demand is good. Livestock \r\nprices have risen in recent months providing great incentive for \r\nfeeding more grain which is now at a very low price relative to \r\nlivestock product prices.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1972/1972-02-cl

"Beige Book Report: Cleveland\nFebruary 9, 1972\nAccording to reports from our directors, business economists, and \r\nbankers, the pace of economic activity in the District is showing \r\nsome signs of recovery from the depressed level of activity last \r\nfall. Insured unemployment has declined, nonfarm employment has \r\nincreased, steel orders have risen recently, and residential \r\nconstruction remains strong. Near-term prospects for a significant \r\nimprovement in manufacturing employment are not particularly good: \r\nmajor firms are counting mainly on productivity gains to achieve \r\nhigher output. The steel industry, which is beginning to experience \r\na sharp recovery, is a case in point. Capital goods producers are \r\nexperiencing some increase in activity, but as yet there are no \r\nsigns of a broadly-based recovery in this industry. In the financial \r\narea, commercial bankers report that they are reluctant to reduce \r\ntheir rates on consumer time and savings deposits because of \r\ncompetition from savings and loans, which appear to be uniformly \r\npaying the maximum rates permitted.\nThe District's insured unemployment rate peaked last September and \r\nhas been declining since then. The drop in January was almost one \r\npercentage point. Nonfarm payroll employment has recovered \r\nmoderately from its cyclical trough of last October. Employment in \r\nthe District was lower in October 1971 than during the trough of the \r\nnation's recession in November 1970. Prospects for a substantial \r\ngain in manufacturing employment during 1972 are not encouraging, \r\nhowever. Many of our industrial directors and a number of economists \r\nrepresenting large manufacturing firms in the District reported that \r\nthey plan to increase output this year with their existing labor \r\nforce, or with only modest increases. In some instances, firms are \r\nplanning employment reductions, even though output is expected to \r\nrise.\nThe steel industry, in particular, plans to achieve sharp increases \r\nin output and shipments through productivity gains. Economists from \r\nthree major steel companies in the District expect this quarter's \r\nsteel shipments to rise at least 25 percent from the depressed level \r\nof the fourth quarter of 1971. In recent weeks, there has been a \r\npickup in steel orders from a number of industries, although orders \r\nfor steel products from capital goods producers and from the auto \r\nindustry remain disappointing. Termination of steel inventory \r\nliquidation, probably in February, is the main reason for the pickup \r\nin orders and shipments: consumption of steel products has been \r\nrelatively unchanged over the last few months. The three steel \r\neconomists report that their respective firms plan little increase \r\nin their work force, and that non-production workers (especially \r\nsupervisory and management employees) are still being cut back. \r\nDespite the recent alignment of foreign currencies, none of the \r\nsteel economists expects an appreciable improvement in the nation's \r\nforeign trade deficit in steel products, which rose to a record high \r\nin 1971. The reasons mentioned include nontariff barriers to steel \r\ntrade, sluggish world demand for steel, and continuation of a \r\nsizeable cost-price differential vis-a-vis foreign steel producers.\nReports of capital goods producers are mixed. Directors and \r\neconomists mentioned a recent improvement in some product lines and \r\ncontinued weakness, or a slowdown, in other lines. Our industrial \r\ndirectors say their firms plan little or no increase in capital \r\nexpenditures during 1972, citing little need for additional \r\nproductive capacity as the main reason. In addition, the directors \r\nwere nearly unanimous in reporting that they expect to be able to \r\nfinance the planned level of capital outlays from internal sources \r\nof funds and, therefore, have no plans for major external financing \r\nin 1972.\nCommercial bank contacts in the District report that they would \r\nwelcome a reduction in rates paid on consumer time and savings \r\ndeposits, because of the unfavorable margin between deposit rates \r\nand the prime rate. However, competition from savings and loans, \r\nwhich are uniformly paying maximum permitted rates, prevents the \r\nbanks from cutting their deposit rates. Several banks indicated that \r\na further reduction in the prime rate would probably force them to \r\ncut their deposit rates, regardless of whether other institutions \r\nfollowed. Most banks maintained that they could not successfully cut \r\ndeposit rates unless they were convinced that savings and loans \r\nwould follow, but they see no reason to expect savings and loans to \r\nreduce deposit rates as long as mortgage rates remain at current \r\nlevels.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1972/1972-02-at

"Beige Book Report: Atlanta\nFebruary 9, 1972\nThere has been a noticeable increase in optimism among businessmen \r\nand bankers throughout the District, and this more confident mood \r\nhas spread to consumers. Retailers surveyed have a more optimistic \r\noutlook now than they had last year at this time. The tempo of \r\nmanufacturing and the rate of capital spending also appear to have \r\npicked up. On the other hand, there is a glut of apartments and \r\nretail selling space in Atlanta. In banking, scattered reductions in \r\nrates paid on consumer time and savings deposits have been the most \r\nnotable development.\nThe Florida tourist industry has benefited from the increased \r\nconsumer spending. Attendance at Disney World has exceeded \r\nexpectations, and attendance at several other Florida attractions is \r\nup. Because of Disney World, motel occupancy in several tourist \r\nareas has greatly increased. During the holidays, motels along \r\nFlorida's main north-south artery were unable to accommodate the \r\ninflux of tourists. One central Florida attraction reports \r\nattendance 30 percent above a year earlier.\nAtlanta is reported to be overbuilt, at least temporarily, in \r\napartments and retail store space. A surplus of space in office \r\nparks was reported earlier. A very large increase in the number of \r\napartments coming onto the market is occurring in Atlanta. The glut \r\nof apartments has prompted two large mortgage banking companies to \r\ndiscontinue financing additional multifamily housing in Atlanta. \r\nThere has been one foreclosure on a new complex in the Atlanta area. \r\nIt is also reportedly difficult to place participations in mortgages \r\non Atlanta apartment complexes. However, there seems to be no glut \r\nin single family housing in Atlanta. Retail store space has also \r\nincreased sharply in Atlanta in the past year. Existing space, \r\naccording to a major retailer, is sufficient for at least five \r\nyears. On the other hand, apartment building is strong in the \r\nBirmingham area, where construction was recently started on a $100 \r\nmillion planned community. A shortage of apartments is reported in \r\nthe Jackson, Mississippi area.\nA pickup in the pace of manufacturing is occurring. Increased \r\nproduction and employment is reported in industries such as apparel, \r\nautomotive and trucking, boating, and health equipment. There also \r\nappears to be an increase in the number of plant expansions and new \r\nplant locations. Reports have reached us that the Huntsville, \r\nAlabama area has more prospects for new industry than ever before. \r\nNew plants and plant expansions are reported for industries such as \r\nfurniture, mobile homes, chemicals, and small aircraft. A large \r\nincrease in capital outlays is accompanying oil exploration in \r\nsoutheast Alabama and northwest Florida.\nBanks in Nashville and Knoxville have generally cut time and savings \r\ndeposit rates by 1/2 percent. The largest savings and loan \r\nassociation in Knoxville announced plans to reduce its passbook rate \r\nfrom 5 percent to 4 1/2 percent on April 1. One Birmingham bank has \r\nreduced its savings deposit rate from 4 1/2 percent to 4 percent. \r\nThree banks in Jacksonville and two in New Orleans have shaved time \r\ndeposit but not savings deposit rates. One other New Orleans bank \r\nhas discontinued accepting deposits with over one year maturity. \r\nIsolated reductions in some consumer time deposit rates have been \r\ndetected in Tampa, St. Petersburg, and Miami. However, the movement \r\nto lower rates does not seem to be gaining momentum, and there \r\nevidently is no rush by savers to extend maturities on time deposits \r\nin order to lock in high rates. Several bankers mentioned that they \r\nwould like to cut rates but could not for competitive reasons. \r\nBankers in Jackson, Mississippi and Atlanta have no plans to reduce \r\nrates.\nInflationary pressures currently seem the greatest in telephone and \r\nother utility rates and in real estate in south Florida.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1972/1972-02-da

"Beige Book Report: Dallas\nFebruary 9, 1972\nRecent trends in the major indicators of economic activity within \r\nthe District were mixed. Some sectors continued to advance, but \r\nareas of sluggishness were evident. Employment in the five \r\nsouthwestern states fell in December, and the unemployment rate rose \r\nslightly. Industrial production in Texas slipped in December, after \r\nadvancing to a record high in November. Construction activity in the \r\nfive-state region continued its upward trend. In the retail sector, \r\ndepartment store sales showed further strength, but registrations of \r\nnew automobiles were down.\nSeasonally adjusted, total employment in the five southwestern \r\nstates edged downward slightly in December. And with the labor force \r\nin these states showing a slight increase, the unemployment rate \r\nrose to 4.9 percent, compared with 4.8 percent in November. In spite \r\nof this increase, however, the unemployment rate for these states \r\nwas still below the year-earlier rate of 5.1 percent and well below \r\nthe Nation' s rate for December of 6.1 percent.\nNonagricultural wage and salary employment was up slightly over \r\nNovember, with increased employment in nondurable manufacturing and \r\nmost nonmanufacturing industries accounting for virtually all of the \r\ngain. Employment in services, transportation, and public utilities \r\nrecorded the largest advances, while mining and trade were the only \r\nnonmanufacturing sectors to show employment declines.\nThe seasonally adjusted Texas industrial production index eased \r\nslightly in December, after advancing to a record level in November. \r\nThe small drop resulted from declines in all three major categories \r\nof industry\u2014manufacturing, mining, and utilities. Total \r\nmanufacturing also fell slightly from November, although the \r\nproduction of nondurable goods increased somewhat. Changes in the \r\noutput of almost all manufacturing groups were moderate. Among \r\ndurable goods' industries, only lumber and wood products showed \r\nincreased output. Production of all other durables declined \r\nmoderately. Mining output continued to edge downward despite a \r\nsizable rise in the production of natural gas. Production of crude \r\noil and natural gas liquids fell slightly. Utility output was also \r\ndown, as the distribution of electricity fell sharply.\nThe Texas oil allowable was increased for February. This advance was \r\nthe largest since October 1970 and the third consecutive rise after \r\nseven monthly reductions. The allowable for Louisiana was raised for \r\nthe first time in three months, while the allowable in Oklahoma \r\nremained unchanged.\nConstruction activity in the five southwestern states, as measured \r\nby the value of contracts awarded, increased slightly in December. \r\nResidential building continued to be the major emphasis in building \r\nactivity as it rose in December and remained well ahead of the year-\r\nearlier level. Nonresidential building was also up slightly after \r\nfalling sharply in November. Nonbuilding construction activity, \r\nhowever, declined in December. The cumulative value of contracts \r\nawarded in the five-state region in 1971 was more than 20 percent \r\nhigher than a year earlier.\nRecent indicators of retail spending were mixed. Registrations of \r\nnew passenger automobiles fell 7 percent from the month before in \r\nDallas, Fort Worth, Houston, and San Antonio. But cumulative \r\nregistrations in the four centers for the year were 20 percent \r\ngreater than in 1970. Department store sales in the Eleventh \r\nDistrict were 11 percent higher in the four weeks ended January 22 \r\nthan in the corresponding period a year before. Total sales for 1971 \r\nwere 7 percent higher than in 1970.\nThe cotton harvest in Texas and Oklahoma, which was the latest in 20 \r\nyears, is nearing completion. The cotton harvest in Arizona, \r\nLouisiana, and New Mexico is also virtually finished. The cotton \r\ncrop in the District states is expected to total slightly less than \r\n4.3 million bales. That is well below the 4.6 million bale crop in \r\n1970. Higher prevailing prices for all quantities of cotton are \r\npartially offsetting the production losses which were attributable \r\nto unseasonably cold and wet weather. Livestock conditions are \r\ngenerally good in the District. On January 1, Texas had 20 percent \r\nmore cattle on feed than a year earlier, but the number on feed in \r\nArizona declined slightly during the same period. The index of \r\nlivestock and livestock products rose substantially from mid-November through mid-January as beef cattle and hog prices were up \r\nsharply.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1972/1972-02-ny

"Beige Book Report: New York\nFebruary 9, 1972\nMixed opinions were expressed recently by the directors of this Bank \r\nand of the Buffalo Branch as well as other local businessmen \r\nregarding the current economic situation. Most were disturbed by the \r\nimplications of the President's budget message, but on balance felt \r\nthat so far Phase II was having a beneficial effect on the economy; \r\nonly scattered improvement was reported in the unemployment picture. \r\nIn general, it was felt that the prospects for increased business \r\noutlays on plant and equipment had not materially improved over the \r\nrecent past. However, the majority looked for increased inventory \r\noutlays, reflecting in good part a strengthening of consumer \r\nconfidence, as reported by the retailers that were contacted. Most \r\ndirectors that expressed an opinion felt that the international \r\ncurrency realignment had not had, but eventually would have, a \r\nbeneficial impact on the country's trade balance.\nConcern, in varying degrees, was expressed over the President's \r\nrecent budget message. All of the Buffalo Branch directors saw the \r\ndeficit as adding to inflationary forces, although the majority felt \r\nthat its likely stimulative effect on the economy would not be \r\nexcessive. One of these directors, however, the Vice President of \r\none of the largest up-state firms, saw a greater danger of over-stimulation from the projected deficit for fiscal 1973 than from the \r\ncurrent year's deficit. The chairman of the board of a large New \r\nYork City bank thought that the $87 billion of deficits compiled in \r\nthree years could signal that huge deficits were becoming a fiscal \r\n\"way of life,\" which would make inflation difficult to check while \r\nother directors also were concerned over current fiscal policy. \r\nAmong the local businessmen contacted for an opinion on this issue, \r\nthe senior partner of a leading accounting firm felt that the \"last-minute disclosure\" of the size of the projected deficit has shaken \r\npublic confidence, and had left many businessmen \"dismayed.\" A \r\nleading New York City banker doubted that expenditures and the \r\ndeficit would reach projected levels, but in any event felt that the \r\nrelease of these figures had generated uncertainty in the financial \r\nmarkets.\nSentiments were mixed regarding the effectiveness of Phase II. On \r\nbalance the respondents felt that it was having a constructive \r\neffect. Most regarded the Price Commission as being more effective \r\nthan the Pay Board in reducing inflationary pressures, but a member \r\nexpressed the opinion that the Pay Board has had some psychological \r\neffect in reducing the size, as well as the number, of wage \r\nincreases demands, a fact which is not reflected in statistics it \r\nreleases. Among the specific comments made, the President of a large \r\ncopper firm said that the Pay Board \"hasn't demonstrated that it had \r\nthings under control,\" a feeling that was shared by the chairman of \r\nthe board of a large New York City bank. Several of the Buffalo \r\nBranch directors pointed to apparent inequities in the Board's \r\nrulings, which they felt resulted from the use of different \r\nstandards for particular labor groups. On the other hand, the \r\npresident of a large liquor manufacturing firm reported that the \r\n\"Board had been a definite factor\" in keeping down the wage \r\nincreases for his firm in a recent wage settlement, while a \r\nRochester businessman noted that fewer of his employees have been \r\nasking individually for wage increases.\nRegarding the employment situation, the vice-president of one of the \r\nlargest up-state firms expected the increases in hours worked to \r\nforeshadow additional hirings. The job situation in Rochester was \r\nreported to have shown a steady improvement since last May. Other \r\ndirectors and other business leaders, however, were unable to detect \r\nan improvement in the current unemployment picture.\nWith respect to outlays for plant and equipment, the directors and \r\nother business leaders expressing an opinion on this subject \r\ncontinued to look for little change, in good part because of the \r\nhigh rate of unused capacity.\nThe outlook for increased inventory outlays, however, seems to have \r\nimproved on balance. Buffalo Branch directors shared a feeling \r\nexpressed by one of them that \"inventory downward adjustments have \r\nbottomed out.\" Moreover, the local retailers that were contacted, \r\nwhile reporting that January sales were below expectation in the New \r\nYork City area, in general looked for a good year and indicated that \r\nthey were planning to increase their inventories accordingly. A \r\nsenior executive of New York City's largest department store was \r\nmost optimistic, and looked for a \"very very\" good year.\nConcerning the impact of the international currency realignments, \r\nthe Buffalo Branch directors felt these measures were a step in the \r\nright direction but that it was still too early to detect signs of \r\nan improvement in the competitive position of United States goods in \r\nworld markets. The chairman of the board of a large New York City \r\nbank expected no real change in the trade balance before 1972. Other \r\nrespondents felt that the realignments would ultimately have a \r\nfavorable impact on their firms competitive positions, but it was \r\nnoted that they did not seem to have much effect on imports from \r\nJapan.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/1972/1972-02-sf

"Beige Book Report: San Francisco\nFebruary 9, 1972\nThe general opinion of our directors is that the economy is \r\nexpanding at a steady pace. Retail sales in particular set records \r\nduring the past Christmas season. On the other hand, weaknesses \r\npersist in other areas; unemployment is still relatively high, and \r\nthere is no evidence of any jump in business capital expenditures. \r\nWith certain reservations, Phase II appears to be generally accepted \r\nby business and the public. Inflation no longer seems to be regarded \r\nas the threat it was earlier in 1971. This acceptance of Phase II, \r\nat least for the immediate future, combined with a steady expansion \r\nof the economy, points toward a better record in 1972.\nRetail sales reached new highs in December. The increases were 8 to \r\n12 percent above the levels of the previous year, and the gains were \r\ngeneral across the District. Oregon, where 5 to 8 percent is the \r\nestimated gain, is an exception, but Oregon had a better record in \r\nthe previous year than the other states. A large appliance chain in \r\nUtah and Idaho had sales 9.6 percent above those of 1970. Even in \r\nthe Puget Sound area, where unemployment remains high, strong gains \r\nin retail sales up to 12 percent were reported. Most classes of \r\ngoods seem to have shared in the higher sales; demand was equally \r\nstrong for both high- and low-priced items. Similarly automobile \r\nsales have been good. Domestic makes are reported to be selling \r\nrelatively better than imported cars.\nConstruction continues to be a source of strength, principally \r\nresidential construction and government projects. Derived demand \r\nfrom construction is stimulating production and employment in the \r\nlumber and wood products industries in Oregon and Washington. On the \r\nother hand, prospects in some kinds of mining are less promising; \r\nfor example, in Utah copper mines are reducing their workweek and \r\nfurther reductions are possible.\nLast year was an excellent one for agriculture in most of the \r\nTwelfth District; reports from Washington, Oregon, and Idaho \r\nindicate a similar prospect for 1972. Cattle prices are high, and \r\nthe demand for fruit is good. Wheat prices may be lower because of \r\nheavier planting plus the carryover due to the dock strike.\nBankers report a decline in lending rates. CD rates have also fallen \r\nand most banks, but not all, have cut the rate paid on passbook \r\nsavings accounts. There has been no major change in loan demand.\nPhase II has been well received as a means of stabilizing prices, \r\nand as yet there is no strong discontent with the controls. Two \r\naspects are receiving some criticism which may become more serious. \r\nFirst of all, businessmen seem to feel that the wage increases \r\nallowed are more generous than those allowed for prices, and some \r\nthink that the larger unions will attempt to obtain wage settlements \r\nabove those permitted under the guidelines. If this occurs one \r\nresult may be to squeeze profits and restrict investment. The second \r\ncomplaint is about the detailed administration of the guidelines, \r\nparticularly the ambiguities in the rules and the possibility of an \r\nincreasing number of exceptions. If confusion builds up, support of \r\nthe controls may be eroded.\nOverall, the consensus is that for the moment the price guidelines \r\nare being followed conscientiously by most businesses, and the wage \r\nrestraints are being accepted by most workers even though their \r\nunions may be opposing controls on their wage contracts. Our \r\ndirectors have no general views as to how long Phase II will be \r\nneeded or how successful it ultimately will be, but they support it \r\nat this time.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1972/1972-02-ch

"Beige Book Report: Chicago\nFebruary 9, 1972\nFor the most part economic sentiment in the Seventh District \r\ncontinues to lack exuberance, but total activity probably is rising \r\nmoderately, and some firms producing consumer durables and capital \r\ngoods are very pleased with the recent trend of their orders. Job \r\nmarkets continue slack and local labor offices foresee only seasonal \r\nchanges in employment in the first quarter. Liquidity of consumers, \r\nbusiness firms, and lending institutions has improved substantially \r\nin the past year. Increasingly, the credit sectors have become \r\n\"buyers' markets.\"\nDemand for consumer household durables\u2014virtually all major \r\nappliances, furniture, and television (especially color)\u2014has been \r\nvigorous in recent months. Producers expect further gains in 1972, \r\nand are encouraging inventory building by dealers and distributors. \r\nWe are unable to reconcile heavy factory orders and shipments with \r\nthe modest increase in retail sales shown for the furniture and \r\nappliance stores in the department of commerce report.\nGM recently announced another increase in employment at auto \r\nassembly plants (the third in about two months). But other auto \r\nproducers have cut production schedules for some models because of \r\nhigh inventories. The realignment of currencies, together with \r\nrising costs abroad, have about eliminated the price advantage of \r\nimports, despite the end of the surcharge. Plans are underway to \r\nincrease domestic procurement of components for subcompacts. \r\nProduction of small cars directly competitive with foreign \r\nsubcompacts is being pushed to capacity, but labor unrest is \r\nthreatening current output schedules. Styling changes have been \r\ndeferred for U.S. full-sized cars, apparently because of attempts to \r\nconform to safety and pollution standards.\nDemand for heavy trucks (gross vehicle weight of 26,000 pounds or \r\nmore) for highway transport and construction work is extremely \r\nstrong. Producers of major components, including engines and rear \r\naxles, are operating at capacity. Demand for highway trailers also \r\nhas increased. Gains in highway traffic volume, higher profits, and \r\nlarger total cash flow for trucking firms are expected to maintain \r\ndemand for transport vehicles for many months.\nOther capital goods sectors show signs of revival. Orders for \r\ncapital goods components improved markedly in the fourth quarter and \r\nhave continued strong thus far in 1972. Some tool and die shops, and \r\nsome producers of machine tools, are reporting modest improvement in \r\norders from very depressed levels. Demand for construction machinery \r\nfrom domestic customers is fairly good. Foreign demand for virtually \r\nall exported capital goods nose-dived about mid-1971 and has not \r\nrecovered.\nOrders for steel have increased as expected and Chicago area \r\nproducers are pleased with recent trends. One large mill is now \r\noperating at \"normal\" levels. Auto companies are buying steel again, \r\npartly because excess inventories have been exhausted, but also \r\nbecause of price concessions. Demand for steel plates has increased, \r\nand a substantial backlog exists for fabricated structural steel for \r\nlarge buildings. Producers of household appliances are now buying \r\nsteel at a good rate. Steel requirements for facilities for the oil \r\nand chemical industries have exceeded expectations. The anticipated \r\nrise in demand for railroad equipment, however, has not yet \r\nmaterialized.\nAlthough total manufacturing employment in the District appears to \r\nhave stabilized, announcements of plant closings continue, \r\nespecially in the Detroit and Milwaukee areas. Multi-plant companies \r\nare consolidating operations in fewer locations in an effort to cut \r\ncosts. Also, there is a strong tendency to locate new facilities in \r\nthe South (or abroad) to benefit from lower taxes, lower labor \r\nrates, and a more docile (more \"cooperative\") labor force. In some \r\ncases, labor unions are showing greater willingness to negotiate \r\nproblems.\nProspects remain good for a high level of housing starts in the \r\nDistrict in 1972. But concern is growing over problems in the FHA \r\nsubsidization programs. Some large new office buildings have been \r\nannounced recently for the Chicago Loop, in the face of a reported \r\nlarge overhang of unrented space, in existence and under \r\nconstruction.\nThe meat-producing rural areas of the District have been cheered by \r\nhigh prices for cattle and hogs. Recently, prices of meat animals \r\nhave edged down, however. Larger numbers of cattle on feed are \r\nexpected to increase marketings and lower cattle prices somewhat \r\nfurther. Cutbacks in hog production are likely to moderate further \r\ndeclines in hog prices. Farmland values increased about 4 percent in \r\n1971, and a growing number of bankers expect further increases in \r\n1972.\nDistrict banks\u2014large and small, city and rural\u2014have an ample \r\nsupply of funds and are actively seeking loans. Business loan demand \r\nis reported to be very weak with more than seasonal declines in \r\noutstandings underway. Savings inflows continue very strong, both at \r\nbanks and S&Ls. Except for Detroit (where pass book rates were \r\ncut to 4 percent in 1971), savings rates offered by large banks \r\nremain at the ceiling. Many rural bankers would like to have \r\nRegulation Q ceilings reduced, but large city banks fear S&L \r\ncompetition. A prominent Chicago bank executive stated recently that \r\nno cuts in savings rates are planned for the near future, and his \r\nbank probably would have to lead the parade. Negotiable CD money is \r\nnot actively sought, especially with maturities of less than six \r\nmonths. Many comments relate to the \r\n\"cost-squeeze\" on banks \r\nresulting from continued high costs of money, and high expenses \r\ngenerally, in the face of lower market rates. Attempts are being \r\nmade to hold down employment and other operating costs.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1972/1972-02-ph

"Beige Book Report: Philadelphia\nFebruary 9, 1972\nOn balance, economic conditions look brighter in the Third District \r\nthan in recent months. Area manufacturers experienced a pickup in \r\nnew orders and shipments during January and expect it to continue \r\nduring the next six months. Capital spending plans are up and \r\nliquidity positions seem to be adequate. Bankers reported sluggish \r\nloan demand for January but expect some seasonal increases by March. \r\nInterest rates are expected to be on the upswing shortly, especially \r\nat the short end of the maturity structure. The price picture \r\nremains mixed. There is some concern regarding the size of the \r\nbudget deficit.\nDistrict manufacturers polled in the bank's monthly business outlook \r\nsurvey find the economic picture much brighter than in recent \r\nmonths. While November and December saw essentially unchanged \r\nconditions, January brought increased activity on many fronts. Over \r\n40 percent of the respondents experienced increases in new orders \r\nand shipments during January. While no firms were adding employees \r\nin November, over 10 percent did so last month. Over 13 percent of \r\nthe respondents increased the average employee workweek in January, \r\nthe largest percent to so indicate in several months. This pickup in \r\nactivity is expected to continue through February.\nAlso, the manufacturers remain optimistic about the picture six \r\nmonths out. Approximately three-fourths of the respondents see \r\nbusiness activity, both in general and at the firm level, to be \r\nincreasing in the next half year. This intermediate-term optimism \r\nleads nearly 40 percent of the manufacturers to plan increases in \r\ncapital expenditures.\nThe bank's annual nationwide survey of corporate treasurers also \r\npicked up increased capital spending projections. The firms \r\ncanvassed (Fortune's 650 nonfinancial firms) plan to increase their \r\nplant and equipment by around 10 percent during 1972. Also, the \r\nsurvey found that most financial managers now feel that liquidity \r\nhas returned to an acceptable level, and they look forward to more \r\nthan adequate liquidity this year.\nArea bankers report that business loan demand has been sluggish. The \r\ngreatest activity has been in consumer loans with autos giving the \r\nmost support. The real estate loan picture generally seems weaker. A \r\nmajority of bankers are hoping for some seasonal help in March.\nOn the interest rate front, area bankers feel rates are bottoming \r\nout and will start an upturn in the near future. Corporate \r\ntreasurers also see some upward movements for short-term rates as \r\nthe year progresses. However, the treasurers expect longer-term \r\nrates to hold fairly steady. They note that pressure from the \r\ncorporate sector should be minimal, if internally generated funds \r\nlive up to current forecasts. Also, they believe inflationary \r\npressures are diminishing, thus helping to reduce the pressure on \r\nlong-term rates even more.\nMembers of the bank's board of directors and some area bankers \r\nexpressed concern over the size of the government deficit. Although \r\nthey feel the current deficit may be appropriate for a slack \r\neconomy, they fear that the size of the deficit may not be trimmed \r\nback as the economy nears full employment.\nThe area price picture remains mixed. Although prices paid were \r\ngenerally steady during the past three months for District \r\nmanufacturers, about one-fourth of those canvassed reported price \r\nincreases for January. Furthermore, over 35 percent expect price \r\nincreases for February.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/1972/1972-02-su

"Beige Book: National Summary\nFebruary 9, 1972\nModerate recovery, based mainly on strength in residential \r\nconstruction and some consumer outlays, continues to epitomize the \r\ncourse of the economy. Optimism prevails despite widespread slack in \r\nemployment and business loan demand. The range of response from \r\nReserve Banks is small. At best, the economy is expanding \"on a \r\nbroad front\" and \"at a steady pace.\" Superlatives were confined \r\nmainly to demand for consumer household durables, heavy trucks and \r\nbuilding materials. At worse, there are \"some signs of recovery,\" \r\nthough the upturn \"can barely be perceived\" in the eyes of some.\nPhase II has been generally accepted\" and has been regarded as \r\nhelpful so far in aiding competitive forces to limit price \r\nincreases. Some criticisms have developed, however, which may menace \r\nits future. Numerous declines in interest rates, particularly on \r\nmortgages and consumer deposit accounts, are reported. Savings flows \r\nhave held up well. While some concern was expressed over the size of \r\nthe Federal deficit, most were centered on the fear that large \r\ndeficits will become a fiscal \"way of life,\" which could not be \r\nabandoned as the economy approaches full employment.\nAnticipated business investment remains very strong, though the \r\nconcrete signs that have already emerged are mixed. In a survey of \r\nthe corporate treasurers of Fortune's 650 nonfinancial firms, the \r\nPhiladelphia bank found planned spending on plant and equipment will \r\nincrease by 10 percent in 1972. That bank, along with Atlanta and \r\nChicago, found numerous incidents of plant expansions and new \r\nplants. Neither New York, Cleveland, St. Louis, San Francisco, or \r\nBoston, however, found signs of a surge in capital spending. While \r\nthe high level of unused capacity is typically cited as the cause, \r\nSt. Louis found sluggish capital expenditures among some firms \r\nexperiencing higher operating to capacity ratios. Although a \r\nmajority of firms reporting to the New York bank anticipated higher \r\ninventory outlays, Kansas City encountered \"further inventory \r\nreductions, and no inventory buildup-sometimes in spite of increased \r\nsales expectations.\" Neither Richmond nor Boston reported systematic \r\ninventory replenishment.\nThere was a pickup in the pace of manufacturing orders, shipments, \r\nand backlogs in the Philadelphia, Atlanta, Richmond, and Chicago \r\nDistricts. Steel companies in the Cleveland District expect first \r\nquarter shipments to outstrip last quarter's by 25 percent. Steel \r\norders have picked up in recent weeks in Cleveland, and in Chicago \r\nthey show the broadly based gain which had been expected.\nMost of the increases in employment were recorded in the East. \r\nPhiladelphia found that 10 percent of manufacturing firms surveyed \r\nhad increased employment and 17 percent had increased average hours. \r\nRichmond noted shortages of skilled and unskilled labor. Scattered \r\ngains also occurred in upstate New York and in the Cleveland and \r\nAtlanta Districts. Elsewhere the employment picture remained bleak, \r\neither stagnating or deteriorating. Little improvement was the story \r\nin Boston, St. Louis, and most of New York, while some layoffs \r\nappeared in Dallas, Cleveland, and Minneapolis.\nContinued strength in construction, primarily residential \r\nconstruction, and heavy output of lumber and wood products were both \r\nmentioned often. Financing proved not to be a problem, as savings \r\nflows were reported to have held high or even accelerated, while \r\nmortgage rates have either fallen, as in Richmond and Minneapolis, \r\nor downward pressure has developed, as in St. Louis. Some demand \r\nproblems, resulting from overbuilding, have popped up for \r\napartments, in Atlanta and in the Twin Cities, and in retail selling \r\nand office space, in Atlanta and in the Chicago loop district.\nA fear of competition from savings and loan associations has kept \r\ncommercial banks in the Atlanta, Chicago, Minneapolis, and Cleveland \r\nDistricts from cutting rates paid on consumer time deposits. Several \r\nbanks have indicated to the Cleveland bank \"that a further reduction \r\nin the prime rate would probably force them to cut their deposit \r\nrates, regardless of whether other institutions followed. Most banks \r\nmaintained that they could not successfully cut deposit rates unless \r\nthey were convinced that savings and loans would follow, but they \r\nsee no reason to expect savings and loans to reduce deposit rates as \r\nlong as mortgage rates remain at current levels.\"\nVariations abound in the sales performance of consumers' goods. Good \r\ngains in general retail sales materialized in San Francisco and in \r\nRichmond. Demand was vigorous for consumer household durables in \r\nChicago, and new orders were encouraging in Boston. Strong durable \r\ngoods sales in Minneapolis accompanied only modest increases in the \r\nsale of nondurables. Mixed patterns were also experienced in St. \r\nLouis, where services were strong and department store sales were \r\nweak, and in Dallas, where department store sales were up and new \r\nautomobile registrations were down.\nKansas City and Richmond reported buoyancy in consumer loan demand, \r\nbut they, along with Philadelphia, Chicago, Boston, and San \r\nFrancisco, continued to report weak business loan demand.\nThe three academic respondents contacted by Boston agreed that an \r\nexpansive policy should be continued until additional signs of \r\nstrength appear.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1972/1972-02-ri

"Beige Book Report: Richmond\nFebruary 9, 1972\nOur latest survey of businessmen and bankers in the Fifth District \r\nsuggests a further moderate improvement in business activity in \r\nrecent weeks. Survey respondents indicate continuing gains in \r\ngeneral retail sales but no great strength in automobile demand. The \r\nmanufacturing sector continues to register advances, with \r\nmanufacturing respondents reporting further increases in shipments, \r\nnew orders, backlogs, employment, and hours worked per week. Results \r\nof a special survey of inventory plans suggest that both \r\nmanufacturers and retailers are currently in the process of making \r\nsmall to moderate increases in their inventory positions. Bankers, \r\nhowever, report no notable improvement in inventory loans or in \r\nbusiness loan demand in general. On the other hand, consumer and \r\nreal estate loans remain strong.\nCompared with recent surveys, an unusually large fraction of \r\nmanufacturers in our latest survey report increases in new orders \r\nand backlogs. A smaller fraction indicate increases in shipments, \r\nemployment and hours worked per week. Interestingly, nearly a third \r\nof the manufacturers in our survey report less than adequate \r\nsupplies of unskilled labor in local labor markets while nearly one \r\nhalf report less than adequate supplies of skilled labor. Of 26 \r\nmanufacturing firms participating in a special survey of inventory \r\nplans, 9 indicated a change in plans in view of recent changes in \r\nsales and sales prospects. Of these, 5 reported upward adjustments \r\nin planned inventory positions and 4 reported downward adjustments. \r\nEleven of the 26 indicated that their inventories will rise slightly \r\nto moderately in the current quarter while 6 plan inventory cutbacks \r\nin the same period.\nA large majority of respondents in the trade sector report further \r\nrecent gains in retail sales, although reports suggest no great \r\nbouyancy in sales of new automobiles. Employment in this sector has \r\nchanged little in recent weeks, although hours worked per week are \r\nreported up. Only 6 major retailers were included in our special \r\nsurvey of inventory plans, but of these half indicated that planned \r\ninventory positions had been adjusted upward in light of recent \r\nchanges in sales and sales prospects. Four of the 6 indicated slight \r\nto substantial increases in inventory positions in the current \r\nquarter while one indicated a slight decrease.\nResponses from District bankers suggest some slight further \r\nincreases in both residential and nonresidential construction during \r\nthe past month. Approximately 40 percent of banking respondents \r\nreported increases in the demand for mortgage loans. Mortgage funds, \r\nhowever, apparently continue to be plentiful and some District banks \r\nrecently announced reductions in mortgage rates, to 7 percent. \r\nBankers report continued buoyancy in consumer loan demand, although \r\nthe rate of increase in consumer outstandings appears to have \r\ntapered off somewhat in recent weeks. Many District bankers, \r\nhowever, appear concerned over what they consider to be unusually \r\nsluggish demand for business loans.\nIn our special survey of inventory plans, a sample of bankers was \r\nqueried concerning current demand for inventory loans and their \r\nexpectations concerning this type of loan demand during the first \r\nquarter. Current loan demand was reported as normal by 8 \r\nrespondents, weaker than usual by 9 respondents, and stronger than \r\nusual by 2 respondents. Eleven bankers expect demand for business \r\ninventory loans for the first quarter of 1972 to be about as usual, \r\n5 expect weaker than usual demand, and 3 expect stronger than usual \r\ndemands.\nRespondents are generally optimistic about the economic outlook. \r\nApproximately 60 percent of banking respondents believe that \r\neconomic activity in their area will increase in the immediate \r\nfuture.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1972/1972-02-bo

"Beige Book Report: Boston\nFebruary 9, 1972\nOur directors can barely perceive an upturn in business activity. \r\nWith the exception of a few business lines connected with consumer \r\ngoods, their businesses have experienced neither rising new orders, \r\nhigher desired inventories, longer workweeks nor increased capital \r\nspending plans.\nThere has been little improvement in the labor situation. With the \r\nexception of two industries connected with consumer goods, no \r\ndirectors reported that their firms were adding workers or \r\nlengthening workweeks through increased overtime. Aerospace firms \r\nwere either still laying off workers or had just arrived at the \r\npoint where they were no longer anticipating further cutbacks in \r\nemployment. There was a general feeling, however, that productivity \r\nwas showing increases over last year.\nAll our directors indicated that they still were maintaining a \r\n\"tight ship\" in regard to inventories and were not trying to raise \r\ntheir inventory to sales ratios. In line with higher consumer goods \r\nsales, an increase in consumer inventories was reported by a few \r\nmanufacturers. The two major New England department stores reported \r\nthat January sales were up strongly over last year's weak January \r\nsales and were about as strong as December's sales, on a seasonally \r\nadjusted basis.\nThe directors reported being encouraged by the good performance of \r\nnew orders for consumer goods, but new orders in the aerospace and \r\nmachine tool industries were still below a year ago. One director \r\nwhose company manufactures helicopters said he was not encouraged by \r\nthe higher obligational authority in the fiscal 1973 budget for the \r\ndefense department because this would not be translated into \r\npayments for a long time. He expects the aerospace industry, \r\ntherefore, to remain on a plateau for several more years.\nWhen asked, none of our directors reported that the investment tax \r\ncredit had made them raise their capital spending plans since last \r\nsummer. Several directors noted, however, that their firm's capital \r\nspending would be above last year's levels.\nOur bank directors reported that there continues to be a large \r\ninflow of savings deposits and that the demand for mortgages at \r\ncurrent rates is very strong. A large area bank, which accepts \r\nunlimited deposits, has been so inundated by large savings deposits, \r\naveraging $2-3 million each, from hospitals and universities that \r\nthey are lowering interest rates by 1/2 percentage point on deposits \r\nabove $100,000 as of mid-February. The bank directors said that it \r\nwas very difficult to discern any increase in the demand for \r\nbusiness loans, despite lower interest rates.\nSome of our directors noted that they were paying significantly \r\nhigher prices to their suppliers. Steel price increases of 7-8 \r\npercent were noted. Another director said that large price increases \r\nwere posted by small suppliers, while the prices charged by large \r\nsuppliers have remained stable. One director reported having \r\nreceived approval from the Price Board to raise prices on a number \r\nof goods, but most of our directors said that they had not raised \r\nprices, \"yet.\" One director noted reducing the price of marble due \r\nto stiff foreign competition.\nFour new wage agreements were reported as having been settled. \r\nSettlements ranged between 5 1/2 percent to 8 percent. Despite the \r\nmoderate wage increases, one director stated that his firm had had \r\n\"their ears beaten back on work rules and operating nonunion \r\nplants.\"\nThe three respondents who were contacted, Samuelson, Shapiro and \r\nTobin, agreed that monetary policy should \"keep pushing on the \r\nstring.\"\nNone shared the concern, which has been expressed in the press, that \r\nlower short rates would have adverse implications for the \r\ninternational monetary situation. Samuelson conjectured that \r\ncontinued expansion of reserves will help the money supply to take \r\noff in less than six months. Samuelson would require tangible signs \r\nof a successful recovery\u2014more than two months of strong industrial \r\nproduction or a GNP gain of over $30 billion\u2014before he would \"ease \r\noff.\" The pace of real recovery, not a target number for interest \r\nrates or money supply, should be the policy guide.\nTobin argued that recent experience has made the public less quick \r\nto accept the monetarist view as their basis for forming \r\ninflationary expectations. Samuelson pointed out that first quarter \r\ninflation will reflect more upon the strength of Phase II than the \r\npossible \"excessive\" increases in the money stock. Since the \"whole \r\npurpose\" of controls, Tobin noted, was to \"step on the gas,\" it \r\nwould be particularly unfortunate to hold back demand in order to \r\nmake the controls work. He felt it would be at least mid-year before \r\nevidence of a boom momentum could be sufficient to cause a policy \r\nreversal.\nShapiro felt that the fiscal 1972 deficit has been overestimated by \r\n$3 to $6 billion and that, with a $95 billion GNP gain, the \r\nestimated 1973 deficit may also turn out too high. He did feel that \r\nit was a tactical mistake not to have lowered the discount rate at \r\nthe time the deficit was announced. The long market is currently \r\nfrightened, he noted, but the long term trend will be down, and any \r\nrate increases would be transitory. Samuelson feels the relatively \r\nhigh current discount rate poses no problem so long as free reserves \r\nare kept around $200 million and repurchase agreements are conducted \r\nat low rates.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1971/1971-12-ny

"Beige Book Report: New York\nDecember 8, 1971\nAssessment of the economic situation by the directors of the New \r\nYork Bank and the Buffalo Branch and by other business leaders \r\ncontinues restrained. The feelings of uncertainty expressed last \r\nmonth concerning the effectiveness of Phase II in controlling \r\ninflation have not been dissipated, little headway has been made in \r\nreducing unemployment, business continues to pursue cautious \r\ninventory policies, and the demand for business loans does not \r\nsuggest any quickening in the pace of business activity. Consumer \r\nspending over the holiday season is generally expected to exceed \r\nlast year's levels, although there was no feeling that the trend in \r\nsuch outlays was pointing toward boom proportions.\nWith respect to Phase II, the Buffalo Branch directors thought that \r\nthe program might result in some slowing down in the rate of \r\ninflation, but most were not optimistic regarding the chances of \r\nmeeting the 2 1/2 per cent goal for prices. These directors felt \r\nthat the Price Commission would be reasonably successful in holding \r\nthe price line, particularly among larger companies, but that the \r\nPay Board would have difficulties in controlling wage increases\u2014in \r\npart because the Board in its initial operation was \"bucking\" \r\nagainst wage increases granted before the \"freeze\" period and not \r\nyet put into effect. Against this background of relatively more \r\neffective controls on prices than on wages, the vice president of \r\nRochester's biggest firm predicted a profit squeeze, particularly \r\nfor large companies. Among the New York Bank directors, one \r\ncharacterized Phase II as a \"mixed up affair\" and suggested that the \r\nonly way price increases could be held at 2 1/2 per cent would be if \r\n\"business is bad.\" The chairman of the board of a large \r\nmanufacturing concern felt that the program had a 50-50 per cent \r\nchance of \"crudely and clumsily\" moderating the pace of inflation. \r\n(The same odds on the success of the program were also quoted by two \r\nBuffalo Branch directors.) He felt the program could not work for \r\nmore than 12 to 18 months, but regarded this as better than nothing.\nAs to the unemployment picture, the directors that expressed an \r\nopinion on the subject generally saw little, if any, improvement. \r\nThe improvement in some scattered areas was attributed to special \r\ncircumstances. A Rochester businessman, a director of the New York \r\nBank, not only saw no strengthening of the job situation, but \r\nreferred to further layoffs by his own firm and by Life magazine. \r\nThe chairman of the board of the large manufacturing concern \r\nreported that he was not aware of any significant turn for the \r\nbetter. Among the Buffalo Branch directors, only two saw some \r\ndiscernible improvement. The vice president of Rochester's largest \r\nfirm saw a slight strengthening, which he linked to the completion \r\nby most employers of their efforts to reduce costs and improve \r\nproductivity. The chairman of the board of a Buffalo bank reported \r\nsome increase in employment in the Buffalo area associated with the \r\npartial resumption of steel production; however, he did not view \r\nthis as indicating an overall upward trend in local employment, and \r\ncharacterized the local labor market as \"still very weak.\"\nIn general, the directors saw no indication of a significant pickup \r\nin business inventory spending. The Rochester businessman \"detected\" \r\ncontinued caution in businesses' inventory policies. None of the \r\nBuffalo Branch directors saw any change in such policies, with the \r\npossible exception of retailers stocking up for the holiday season. \r\nThe chairman of the board of the large manufacturing concern, \r\nhowever, felt that there had been a \"slight\" improvement in this \r\nsector. None of the directors reported a rise in business loan \r\ndemand that might suggest a quickening of pace in business activity, \r\nalthough the banker directors at the Buffalo Branch reported a \r\nstrong demand for mortgage loans.\nWith respect to consumer spending, opinions were mixed and on \r\nbalance not particularly exuberant. Most of the Buffalo Branch \r\ndirectors described retail sales as \"brisk\" and running above last \r\nyear, at least in dollar terms. Among the New York directors, the \r\npresident of an upstate bank pointed to the strong performance of \r\nautomobile sales, but felt that, apart from this sector, business \r\nremains \"spotty.\" Most of the retailers who were contacted reported \r\nthat business had begun to pick up in recent days, and they were \r\nexpecting a good, if not spectacular, holiday season. The chairman \r\nof the board of a large Rochester department store, however, stated \r\nthat his firm would be fortunate to equal last year's dollar volume \r\nduring this Christmas season.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"Beige Book Report: Dallas\nDecember 8, 1971\nRetail sales in the District were somewhat more sluggish during the \r\n90-day wage-price freeze than during the three months prior to the \r\nAugust 15 announcement of President Nixon's new economic program. \r\nThis was the opinion of executives at a sample of retail firms in \r\nthe Eleventh Federal Reserve District. Inventory positions at most \r\nof these firms are, at present, slightly excessive. Nevertheless, a \r\nlarge majority of the respondents are mildly optimistic about \r\nprospects for sales during the Christmas buying season and on \r\nthrough the first half of next year. However, only a few of the \r\nrespondents expect employment in their firms to increase during the \r\nnext seven months. The costs of the merchandise purchased by these \r\nfirms, as well as retail prices they charge their customers, are \r\nexpected to rise moderately through the first half of 1972.\nIn the three months prior to the August 15 announcement of Phase I, \r\nthe dollar value of total sales increased for nearly three-fourths \r\nof the retail firms surveyed, and remained unchanged for the \r\nremainder. For about one-fifth of these firms, dollar sales rose \r\nsubstantially during this period. During the 90-day wage-price \r\nfreeze, however, only half of these firms recorded sales increases, \r\nand none recorded substantial increases. Moreover, 10 per cent of \r\nthe firms indicated that their dollar sales declined during the \r\nfreeze.\nSales of durable goods by these firms increased moderately both \r\nduring and prior to the freeze. Hence, the weaker total sales \r\nactivity reflected the performance of nondurable goods. In the three \r\nmonths ended August 14, sales of nondurable goods rose substantially \r\nfor 20 per cent of the firms, rose moderately for 30 per cent, and \r\nremained unchanged at the other retail stores. During Phase I, \r\nhowever, nondurable goods sales advanced only moderately for half \r\nthe firms, remained unchanged for 40 per cent, and declined for 10 \r\nper cent.\nFour-fifths of the respondents expect total sales of their firms to \r\nincrease moderately during both the Christmas buying season and the \r\nfirst six months of 1972. Despite the respondents' mild optimism \r\nover prospects for sales, most of them believe that employment in \r\ntheir firms will remain essentially unchanged through mid-1972. \r\nAlmost two-thirds of the firms surveyed consider their inventory \r\nlevel to be excessive, while the rest are currently carrying evenly \r\nbalanced positions. Most executives also believe that the selling \r\nprice of their merchandise and the cost of their inventories will \r\nincrease moderately through June of next year. The profit outlook is \r\nsomewhat more encouraging. Half of the firms believe that profits \r\nduring the first half of 1972 will rise moderately, while the \r\nremaining half believe that profits will not change.\nAll of the respondents indicated that the import surcharge and the \r\nfloating of the dollar in the international exchange markets have \r\ncaused the prices of imported merchandise to increase moderately. \r\nAnd since August 15, the dollar value of sales of imported \r\nmerchandise has risen moderately for only 45 per cent of the firms, \r\nremained unchanged for 33 per cent, and decreased moderately for 22 \r\nper cent. However, the weakness was at least partly attributed to \r\nthe East Coast and Gulf Coast dock strike.\nFor the District as a whole, recent data suggest economic conditions \r\nare improving. Department store sales were 7 per cent greater in the \r\nfour weeks ended November 20 than in the corresponding period a year \r\nbefore. Registrations of new automobiles rose significantly in \r\nOctober from their level in September. Total nonagricultural wage \r\nand salary employment in the five southwestern states continued to \r\nrise in October as employment increased in both the manufacturing \r\nand nonmanufacturing sectors. Although, overall, nonmanufacturing \r\nindustries increased their employment in October, there was \r\nconsiderable variation from industry to industry. Government \r\nprovided the primary source of jobs in the region in October. Among \r\nthe other categories, only construction and trade showed increases \r\nin employment. The seasonally adjusted Texas industrial production \r\nindex slipped slightly in October after recovering in September from \r\na midyear slowdown.\nThe oil allowable was increased from November to December. In \r\nraising the allowable, the Texas Railroad Commission pointed to a \r\nreduction in crude inventories in November. But, with imports \r\ngreater than a few months ago, the Commission held the increase to \r\nonly a marginal advance. Allowables in other producing states of the \r\nEleventh Federal Reserve District, however, were left at November \r\nlevels.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"Beige Book Report: Chicago\nDecember 8, 1971\nThe air of uncertainty emphasized in the last Red Book forecast is \r\nstill widely prevalent in the Seventh District, but signs are \r\naccumulating that business and financial executives believe price-and-wage guideline decisions will be flexible and reasonable. The \r\nmajor consumer durables industries continue as the strongest \r\nsectors, but some producer goods are showing increased vigor. \r\nInventories continue under tight control. Regional unemployment \r\nestimates are generally more favorable, but the reliability of the \r\nestimates are in doubt in some cases. Business firms are moderately \r\noptimistic in projecting results for next year. Credit is available \r\nin all markets, but demand for business loans remains slow.\nThe period since mid-August has been characterized by softening in \r\nprices of finished producer equipment, parts and components, and \r\nnonferrous metals. The freeze helped to accelerate the impact of \r\nmarket forces. As a result of earlier increases, some prices \r\ncontained a good deal of \"water.\" But many executives believe that \r\ncost. increases justify larger price increases than those that have \r\nbeen, or will be, allowed. They believe that labor contracts \r\nnegotiated before and during the freeze will be allowed to stand, \r\nand that \"catch-up\" increases will be granted to unions in related \r\nfields that are now entering negotiations. There are some complaints \r\nabout the limitation of dividend increases to 4 per cent in cases \r\nwhere increases had been planned to aid sales of new stock issues.\nSome labor leaders appear to be concerned that their\nrank-and-file \r\nare not sufficiently militant in support of union positions relating \r\nto the new economic policy. Educational efforts have been expanded \r\nas a corrective measure.\nIn the capital goods sector, demand for heavy trucks has increased \r\nsignificantly in recent months. Increased sales of farm, \r\nconstruction, and materials-handling equipment are expected in 1972. \r\nOrders for parts and components have improved slightly in the past \r\nmonth or two. Producers of railroad equipment believe additional \r\norders are held in abeyance, awaiting certainty on the state of the \r\ninvestment tax credit. Inventories of capital goods producers are \r\nrelatively low.\nThe extremely high level of sales of passenger cars (at least until \r\nthe final third of November) has puzzled auto producers. Dealer \r\nprofit margins have been favorable, so the price freeze is not the \r\nwhole story. The dock strike has been the major factor dampening \r\nsales of imported cars, but appreciation of foreign currencies, \r\nupward cost pressures abroad, and the surcharge are all playing a \r\nrole.\nSteel orders are still disappointing, overall, but the picture \r\nvaries substantially from firm-to-firm and plant-to-plant. One \r\nChicago-area steel producer, with 90 per cent of its normal work \r\nforce on the job, was surprised at the number of workers who did not \r\nrespond to recalls from layoff. Steel operations are expected to be \r\nback to \"normal\" early next year for the entire industry, and 1972 \r\nas a whole is expected to see an 8 per cent rise in shipments from \r\n1971.\nFurther evidence has developed in the past month to suggest that the \r\nhousing market has passed its peak, at least temporarily. In the \r\nChicago area, vacancy rates have increased, and the issuance of new \r\npermits has slowed. The situation varies among sections within the \r\narea, however, and the level of total residential construction \r\nremains very high.\nSome very large commercial construction projects have been activated \r\nrecently in the Chicago area. Office structures are included in the \r\nnew announcements, despite the large volume of space coming \r\navailable in the immediate future and in the next two years. Work on \r\nsome structures is said to have slowed down. Speculative builders \r\nare less prominent, with most new projects supported by large \r\nenterprises that will occupy much of the space.\nReturn to work orders last week to striking dock and grain elevator \r\nworkers are credited with boosting the price of corn, especially the \r\ncash price, because foreign demand can be accommodated. Pressures \r\nfrom the farm sector may have encouraged the return to work. \r\nComments of the Secretary of Agriculture nominee, that steps will be \r\ntaken to boost corn prices, also helped.\nCommercial banks report business loan demand slow, and weaker than \r\nexpected. Purchasers of certificates of deposit are reluctant to \r\ntake maturities beyond 30 days, because of uncertainties over \r\ninterest rate trends. The potential supply of new municipal issues \r\nremains very large. Life insurance companies have ample funds to \r\ninvest because of both reduced demand for policy loans and increased \r\nprepayments of mortgages as homes are sold. Life companies favor \r\nlarge mortgages\u2014industrial, commercial, and multifamily residential\u2014over alternative investments.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nDecember 8, 1971\nIncreased volume of crop marketings and higher livestock prices are \r\nboosting farm income and the agribusiness sector of the Tenth \r\nDistrict economy, despite the negative impact of the dock strike on \r\ngrain prices. Retail sales during the early part of the holiday \r\nseason have been moderately stronger than last year's pace in the \r\nmajor metropolitan areas of the District. With demand deposits \r\nfalling more than seasonally in November and business loan demand \r\nstrengthening, bankers are resisting further commercial loan rate \r\nreductions. Mortgage rates, however, have eased in recent months, \r\nincluding a marked decline in late November in several District \r\ncities. Savings and loan institutions\u2014still enjoying strong savings \r\ninflows\u2014and builders are optimistic on the outlook for construction.\nDistrict cash receipts from farm marketings for the first three \r\nquarters totaled $5.9 billion\u20144 per cent above the\nyear-earlier \r\nfigure. Fourth quarter receipts should show a good advance over last \r\nyear, with most of the increase reflecting sharply higher prices for \r\nlivestock. Lower wheat and feed grain prices will probably more than \r\noffset an increased volume of marketings\u2014pushing crop receipts down. \r\nSince the livestock sector accounts for roughly two-thirds of the \r\nDistrict's farm income, retrenchment of crop prices and the \r\ndisruptive effects of the dock strike have not seriously depressed \r\nthe aggregate farm income picture. Large quantities of wheat were \r\nshipped abroad before October 1 in anticipation of a further \r\nwidening of the dock strike. Feed grains and soybeans\u2014the two \r\ncommodity groups most affected by the strike\u2014are relatively less \r\nimportant in the District than elsewhere.\nSeveral agribusiness firms were contacted about their 1971 sales and \r\nalso their prospects for next year. Suppliers of fertilizers, \r\npesticides, and grain-storage equipment reported good years\u2014attributing their gains largely to the sharp increase in crop \r\nacreage. But two feed manufacturers indicated that sales have been \r\nslipping, although they expect a modest improvement for the year as \r\na whole. Farm machinery sales\u2014which had been sluggish for three \r\nyears\u2014spurted in the third quarter and are continuing to run well \r\nabove year-ago figures. Bumper crops and anticipated tax credits \r\nwere offered as explanations. Agribusiness firms were generally \r\noptimistic about sales prospects. The consensus was that prices \r\nwould show little, if any, additional upward pressure\u2014although the \r\nmanufacturers of farm implements and grain-storage equipment \r\nreported that some increases were likely in view of higher steel and \r\nother costs.\nRetail sales throughout the District appear to be running somewhat \r\nstronger than a year ago, although only a few reports suggest a real \r\nloosening up by consumers. Most officials of the major department \r\nstores surveyed are cautious in discussing their holiday sales to \r\ndate, using such terms as \"satisfactory,\" \"disappointing,\" and \"no \r\ngreat shakes.\" Some specialty and jewelry shops report substantial \r\nsales increases, but no movement toward expensive items is \r\ndiscernible in department stores. Sales of wine and liquor by one \r\nchain of stores were described as only slightly improved over last \r\nyear's mediocre levels. Meanwhile, ski areas are setting new \r\nattendance records.\nDistrict commercial banks report a more than seasonal fall-off in \r\ndemand deposits during November as offsetting considerable growth in \r\nconsumer saving deposits. A large November volume of business loans \r\ncontrasts with the weak pattern of other recent months. Rate \r\nstructures were lowered in early November to a level consistent with \r\na 5 1/2 per cent prime or base rate; the strength of loan demand at \r\nthat rate has stiffened resistance to further downward movement. \r\nUnlike a month ago, bankers now say they would resist going below \r\ntheir own stated prime rate even on national accounts.\nIn the past two or three months, supply-demand conditions of savings \r\nand loan associations have resulted in a gradual easing of mortgage \r\nrates and terms. Net savings inflows are down slightly but continue \r\nstrong. The savings and loan associations appear to have benefited \r\nin November from some reintermediation on the part of savers whose \r\nhigh-yield Treasury notes matured.\nMarked declines in conventional mortgage rates occurred in late \r\nNovember in several cities. Points charged on FHA-GI loans also have \r\ndeclined. Most respondents expect further declines in mortgage rates \r\nin the next 90 days; the general expectation appears to be of a \r\nbottoming out in the 7 1/4 to 7 1/2 per cent area on conventional 75 \r\nto 80 per cent of appraised value loans. Many savings and loan \r\ninstitutions make 95 per cent loans at 8 to 8 1/4 per cent, but use \r\nof such mortgages varies greatly and the instruments are not viewed \r\nwith enthusiasm by lenders.\nResidential construction remains healthy in the District. Builders \r\nlook toward strong sales in the spring, particularly of single-family dwellings. In most cities, the outlook is for construction \r\nactivity in the first half of 1972 to equal or exceed the average \r\n1971 experience. Unless consumer spending greatly accelerates and \r\nproduces an extreme decline in savings inflows, the savings and loan \r\nassociations expect to be able to cope with mortgage loan demand in \r\nthe months ahead.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"Beige Book Report: Minneapolis\nDecember 8, 1971\nUncertainty over Phase II has not affected the pace of business \r\nactivity in the District, and businessmen have not let the \r\nuncertainty interfere with their prior planning. Retailers are still \r\nlooking forward to a good Christmas season, and District retail \r\nsales during Thanksgiving week were very encouraging. In addition, a \r\nrecent newspaper poll revealed some improvement in consumer buying \r\nintentions for next year. Except for some increase in farm machinery \r\nsales, prospects of a 7 per cent tax credit have not yet affected \r\nDistrict investment spending.\nAccording to reports received from Bank directors, uncertainty over \r\nPhase II has not affected the pace of economic activity in the Ninth \r\nDistrict. One director stated that businessmen in his area were \r\ngoing ahead with their plans despite any uncertainty over Phase II. \r\nAnother director considered Phase II a topic of conversation, but \r\nfelt that it has not altered business decisions. One report, \r\nhowever, indicated that small businesses had held down, or delayed, \r\nraises due to difficulty in interpreting Phase II guidelines. The \r\nonly adverse impact of Phase II reported by another director was \r\nthat the time spent by businessmen in interpreting Phase II rules \r\nhad kept managers away from more productive endeavors.\nThe directors also felt that the implementation of Phase II has not \r\nadversely influenced consumer sentiment in the District, and they \r\nreported that District retailers expect their sales to improve. One \r\ndirector, however, did express some concern over consumer skepticism \r\nabout the effectiveness of Phase II because of the large wage and \r\nprice increases that have been permitted by the Pay Board and Price \r\nCommission. Also, a newspaper poll conducted in the Twin Cities \r\nmetropolitan area revealed that only 46 percent of the respondents \r\nbelieved that Phase II would ultimately be successful in holding \r\ndown inflation.\nThe prospects for District Christmas spending are relatively bright \r\nthis year. Bank directors were unanimous in expressing the opinion \r\nthat this would be a good Christmas season for retail trade, and \r\nreports from around the District revealed that sales during \r\nThanksgiving week were encouraging. However, one director did state \r\nthat, while retailers in his area were looking forward to improved \r\nsales, they were not exuberant about their expectations. A business \r\neconomist for a large Twin Cities-based retailer said that he \r\nexpects Christmas spending at department and discount stores in the \r\nUpper Midwest to be up 12 to 15 per cent from a year ago\u2014an \r\noutlook shared by a major Minneapolis-St. Paul retailer.\nLooking forward to next year, the results of a recent Minnesota poll \r\ndisclose some improvement in Minnesota residents' buying intentions \r\nfrom a year ago. Last year, 14 per cent of the survey's respondents \r\nwere planning to buy either a new or used car during the next 12 \r\nmonths. This year, 17 per cent reported they planned to buy an \r\nautomobile during the next year. Twelve-month buying intentions for \r\nhome furnishings were also up slightly from 12 months earlier. \r\nHowever, the survey revealed that Minnesota residents did not \r\nsignificantly increase their buying intentions during Phase I, as \r\nonly 2 per cent reported that they had made unanticipated major \r\npurchases during the first 75 days of Phase I.\nIn the view of Bank directors, the prospect of a 7 per cent \r\ninvestment tax credit has not changed business spending plans in the \r\nDistrict. One director, however, did indicate that the expectation \r\nof the investment tax credit had stimulated farm machinery sales in \r\nhis area. In another director's opinion, the 7 per cent investment \r\ntax credit would be beneficial in the long run.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nDecember 8, 1971\nThe general tenor of the twelve Red Book reports may he summed up as \r\nfollows: a present business situation that is generating little \r\nenthusiasm; an emphasis on uncertainty, perhaps even greater than \r\nusual; and a future viewed with some optimism. This generalization \r\nalone of course conceals a range of views, especially for the \r\npresent situation: \"sluggish\" conditions are reported from \r\nPhiladelphia and Cleveland, while Boston and Dallas report \"good\" or \r\nimproving\" conditions, and some Atlanta District businessmen suggest \r\nthat pessimism has been exaggerated.\" The consensus is greater, \r\nhowever, on the existence and retarding influence of uncertainty\u2014more than a little of which emerges from the presently unknown \r\ninfluence of Phase II policies and their implementation. Yet, \r\nexpressions of optimism for the months ahead are found throughout \r\nthe various Bank reports.\nAs might be expected in a period of uncertainty and adjustment to \r\nnew policies, considerable variations of opinion were gathered by \r\nthe Reserve Banks from respondents to their inquiries. In \r\nconstruction, for example, the Richmond Bank reports some slackening \r\nin both residential and nonresidential building; in Chicago, \r\nresidential vacancy rates are up and new permit issuance has slowed \r\ndown; and construction activity has tended to level off recently in \r\nSt. Louis. On the other hand, continued strength in construction is \r\nreported from Atlanta, Kansas City, and San Francisco. Several Banks \r\nfound mortgage money abundant, and rates and terms easing. Saving \r\nand loan savings inflows remain strong, and life insurance companies\r\nalso reportedly have ample funds and are in search of investment \r\nopportunities.\nConsumer spending, past and expected, also varies considerably from \r\nDistrict to District. On balance, there does not seem to be great \r\nstrength in this sector. Retailers contacted by the New York Bank \r\nexpect a \"good, if not spectacular, holiday season,\" an attitude \r\nshared to a greater or lesser extent by merchants in the Kansas \r\nCity, Dallas, Minneapolis, and San Francisco districts. Prospects \r\nmight be thought a little brighter in the Richmond and St. Louis \r\nareas; a little dimmer in the Philadelphia area.\nThose Banks remarking on inventory investment nearly all cast some \r\ndoubt on a sudden rise in the rate of inventory accumulation. The \r\nNew York Bank's respondents see no significant pickup in business \r\ninventory spending, a view seconded in the Boston report. In the \r\nDallas District, where sales have been slow recently, retail \r\ninventories are described as \"excessive,\" and St. Louis reports that \r\nretail inventories there are not growing with sales. In the San \r\nFrancisco District, inventories are being \"deliberately kept low and \r\ngeared to sales,\" while Chicago states that \"Inventories continue \r\nunder tight control.\" In a somewhat different view, the Richmond \r\nBank notes some recent slight increases in manufacturers' \r\ninventories, but finds retail inventories declining to more desired \r\nlevels.\nThe steel industry's position was commented on specifically in the \r\nChicago and Cleveland reports. Steel orders\u2014\"disappointing\" overall, \r\nbut variable from firm to firm and plant to plant\u2014appear to be in \r\nfor gradual improvement, bringing operations back to \"normal\" next \r\nyear for the entire industry. In the meantime, the steel industry is \r\n\"depressed\" as the inventory liquidation is prolonged by increased \r\nimports and lower-than-expected current consumption of steel.\nWhile the steel situation has combined with several strikes to bring \r\nrecent employment declines in the Cleveland District, employment \r\ngrowth is lagging in other Districts, too. Philadelphia reports \r\nlittle new manufacturing employment, a condition expected to extend \r\ninto the immediate future. Some slight improvement in employment in \r\nscattered areas of the New York District is apparently bringing \r\nlittle improvement in overall unemployment. Employers in the Boston \r\nDistrict note that, with capacity use rates so low, a sizable rise \r\nin demand will be needed before employment is expanded. Yet, \r\nimproving employment situations are reported in the Atlanta, Dallas, \r\nand Richmond districts.\nThe relatively few comments on business capital spending indicate no \r\ncurrent spurt in such activity. However, there has been some \r\nincrease in purchases of heavy trucks, construction and materials \r\nhandling equipment, and especially of farm machinery. Both the \r\nMinneapolis and Kansas City Banks commented that the investment tax \r\ncredit might be partly responsible for the latter, along with the \r\nharvesting of bumper crops and rising farm income. Agribusiness \r\nfirms generally are quite optimistic about their future sales \r\nprospects.\nThere was agreement on the Atlantic and Pacific Coasts on the \r\nfrailty of business loan demand and its relationship to the moderate \r\npace of economic activity. The New York Bank noted that \"the demand \r\nfor business loans does not suggest any quickening in the pace of \r\nbusiness activity,\" and the San Francisco Bank commented as follows: \r\n\".... with few exceptions, bankers describe business loan demand as \r\nweak, reflecting the moderate pace of business spending.\" Business \r\nloan demand was only \"seasonal\" in the Philadelphia area; \"slow, and \r\nweaker than usual\" in the Chicago District; and weak at major banks \r\nin the Eighth District. In the Kansas City District, however, \r\nbusiness loans were stronger in November than in other recent \r\nmonths.\nThe range of feelings expressed about Phase II include uncertainty, \r\nskepticism, and optimism. Several businessmen in the St. Louis \r\nDistrict feel that the new programs have hindered business spending \r\nso far, and some \"see little hope for improvement in prices and \r\nprofits.\" Some respondents in the Chicago District feel that \r\nsufficient price rises will not be allowed to keep up with cost \r\nincreases. A major fear, expressed in the New York report and \r\nimplied in the reports from San Francisco and Chicago, is that \r\ncontrols on prices will be more effective than those on wages, and \r\nthat a profit squeeze will result, especially for large companies. \r\nWhile not overly optimistic about the program's complete success, \r\nthere was an attitude that its influence would be \r\nfavorable\u2014\"better \r\nthan nothing,\" with \"a 50-50 per cent chance of 'crudely and \r\nclumsily' moderating the pace of inflation,\" according to one \r\ndirector of the New York Bank. As the San Francisco Bank aptly \r\nconcluded: \"Overall, Phase II was greeted with less enthusiasm than \r\nPhase I, because its duration and character are more difficult to \r\nassess.\"\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1971/1971-12-sl

"Beige Book Report: St Louis\nDecember 8, 1971\nLeading businessmen in the Eighth District report that business \r\nactivity in recent weeks has continued to move up at a moderate \r\nrate. Consumer demand is encouraging with pre-Christmas sales well \r\nabove levels of the same period a year ago. The higher sales level, \r\nhowever, has had little impact on business confidence and spending \r\nplans. Uncertainty continues to dominate the local business \r\ncommunity, largely as a result of the confusion relative to Phase II \r\nof the new economic program. Construction has leveled off. A high \r\nrate of savings flows continues, while interest rates on mortgages \r\nare generally unchanged. Commercial loan demand remains relatively \r\nlow. Agricultural conditions in the District are generally favorable \r\nand long-run trends toward greater efficiency continue.\nRetail sales have increased substantially in recent weeks. One large \r\nSt. Louis department store reported that sales were running well \r\nahead of the budgeted level. Another reported that early Christmas \r\nsales were significantly above levels of the same period last year. \r\nLikewise, other cities in the District, particularly in the Little \r\nRock area, report similar trends in retail trade. Retail inventories \r\nhave apparently lagged sales trends. One major District department \r\nstore reported that inventories are now 14 per cent less than a year \r\nago despite major sales gains. The achievement was made through \r\nmachine inventory control.\nDespite increased consumer optimism, much of the business community \r\nremains relatively pessimistic and confused. Businessmen question \r\nthe compatibility of the decisions of the wage and price boards, and \r\nsee little hope for improvement in prices and profits. A \r\nrepresentative of a major St. Louis corporation reported that the \r\ncontrols had stymied business investment. Another reported that \r\nmanufacturing industries are still not ready to make new investment \r\ncommitments. Even though sales are picking up, the outlook for \r\nprofits is not sufficient to provide incentive for new capital \r\noutlays. Reporters in Memphis also conclude that the wage-price \r\nprogram is hurting industry.\nConstruction in the Eighth District has tended to level off in \r\nrecent weeks, but the pattern is quite mixed. Following sharp gains \r\nin residential construction in St. Louis during the summer months, \r\nhome sales have dropped substantially in recent weeks and builders \r\nhave larger than desired inventories of new homes. Apartment \r\nconstruction has also been dampened by a higher vacancy rate. In \r\nother parts of the District, however, construction continues to \r\nexpand. Numerous commercial projects are reported to be under way in \r\nthe smaller cities and towns, especially in the Memphis and Little \r\nRock Branch areas, and the industry generally remains optimistic \r\nabout the prospects for next year.\nSavings flows remain strong throughout the District. A large share \r\nof the gain in savings, however, is going to the savings and loan \r\nassociations. Rates paid savers and the rates charged on mortgages \r\nhave both remained stable for several weeks.\nReflecting both business pessimism and the greater efficiency in \r\nhandling inventories, commercial loan demand remains weak at major \r\nDistrict banks. National credit lines are reported to be inactive, \r\nand demand for credit by small local firms is not sufficient to \r\noffset the decline by larger firms. A large St. Louis retail firm \r\nreported major savings in costs of money borrowed for inventories \r\ndespite the rise in sales.\nIn the agricultural sector, autumn weather conditions were excellent \r\nfor harvesting the generally large crops. The dock strike was \r\nbelieved to have had an unfavorable impact on farm commodity exports \r\nand grain prices. Nevertheless, the farm situation is much better \r\nthan a year ago. The larger volume of production has more than \r\noffset price declines for most crops and livestock products. The \r\nlong-run decline in number of farms continues. Good managers are \r\nexpanding their operations, and the less capable ones find \r\nemployment elsewhere. An Arkansas reporter estimated that the number \r\nof rice farmers would decline 10 per cent from 1971 to 1972.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/1971/1971-12-sf

"Beige Book Report: San Francisco\nDecember 8, 1971\nEconomic conditions in the Twelfth District are basically unchanged. \r\nResidential construction continues to be strong and consumer \r\nspending is steady. On the other hand, there is no evidence of any \r\nupswing in current business capital spending. In our directors' \r\ncomments on Phase II, the most common reaction was one of \r\nuncertainty about the details of the controls and their immediate \r\nconsequences, hut some optimism was expressed about the impact of \r\nPhase II on the 1972 economy.\nResidential construction is maintaining its pace throughout the \r\nDistrict, and demand seems high for existing as well as new houses. \r\nMortgage finance is readily available and mortgage rates are \r\nsomewhat lower. There is also somewhat greater strength in \r\ncommercial construction in some (but not all) areas of the District.\nThis activity in construction has benefited other industries; in \r\nparticular, the lumber and wood products industry. Production of \r\nlumber and related products has helped increase employment in the \r\nPacific Northwest. Similarly, a major producer of builders' hardware \r\nreports operations are at capacity in existing plants; he plans the \r\nopening of a new plant in early 1972 to meet strong demand.\nConsumer spending is continuing at a satisfactory rate in most \r\nareas, although consumers are still showing some signs of \r\ncautiousness. Consumers are increasing their purchases of durables, \r\nand some directors interpret this as a sign of improving consumer \r\nconfidence. Retailers are looking forward to heavier purchases \r\nduring the Christmas season. Despite the high level of auto sales, \r\ndealers are not confident that the current rate will be sustained \r\nand some are expecting a slowing of sales in the next few months.\nBusiness investment intentions have not been revised upwards. \r\nCurrent projects are being carried through, but there does not seem \r\nto be any strong incentive to increase investment plans: Inventories \r\nare described by some of our directors as being deliberately kept \r\nlow and geared to sales, as part of a continued cost-reduction \r\neffort. Some manufacturers, such as those supplying the construction \r\nindustry, are doing well, but others report sales below expected \r\nlevels. For example, a major oil company reports gasoline sales \r\nfalling below trend, and jet fuel sales reduced because of lagging \r\nairline demand.\nDistrict banks have been gaining deposits. But, with few exceptions, \r\nbankers describe business loan demand as weak, reflecting the \r\nmoderate pace of business spending. Banks, which have attempted to \r\nexpand business loans, report that they have had to accept somewhat \r\ngreater risks. Real estate demand (as already noted) has been \r\nstrong, and consumer installment lending has risen. Some banks have \r\nincreased their efforts to expand their installment loans. Interest \r\nrates in general have trended downward.\nThe general reaction of our directors to Phase II is one of \r\nuncertainty. In particular, there is uncertainty about the details \r\nof the price- and wage-setting procedures and, consequently, there \r\nis unwillingness to make major decisions at this time. About the \r\nlong-run consequences, there was no consensus. Some directors felt \r\nthat the decisions of the pay and price agencies would lag behind \r\nmarket changes and others feared that wage increases would not be \r\ndampened by the Pay Board. Many were unwilling to estimate what the \r\nconsequences of the controls would he, but other directors thought \r\nthat the controls would produce expectations of less inflation and \r\nthat this would have favorable effects on economic activity next \r\nyear. Overall, Phase II was greeted with less enthusiasm than Phase \r\nI, because its duration and character are more difficult to assess.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-12-bo

"Beige Book Report: Boston\nDecember 8, 1971\nOnly a few of our directors could be reached this month, but the \r\nresponses of these directors were much more optimistic than they \r\nwere a few months ago. Business was described as \"good\" or \r\n\"improving.\"\nA manufacturer supplying raw materials to the tire industry reported \r\nthat \"business looks good in the month of November.\" Business was \r\nalso reported as \"good\" by a manufacturer of leisure-time boats. \r\nDespite the large volume of orders in the boating field, the \r\nmanufacturer is only building to order, not to stock. Inventories \r\nare, however, being built up by retail dealers who are very \r\noptimistic about next season's sales.\nSouthern New Hampshire, which already has a far lower unemployment \r\nrate than the national average (3.8 per cent), is the only area \r\nwhere manufacturing plants, previously not in the labor market, had \r\nrecently begun hiring again. Both the shoe and textile industries \r\nwere reported now to be looking for new help. Other manufacturers \r\nnoted that, since they were still operating below capacity. demand \r\nwould have to rise much farther before they would have to expand \r\ntheir labor force. Despite the steadily improving industrial \r\npicture, there has not been any inventory accumulation beyond \r\nincoming orders.\nNone of our respondents have recently increased their capital \r\nspending plans; however, one manufacturer in the machine tools \r\nbusiness was very optimistic about new sales possibilities in the \r\nSoviet Union. He noted that our Government has loosened up its \r\nexport licensing for sales to the Soviet Union and that another firm \r\nhas received tentative orders for $60 million. One of our director's \r\nfirms is the first American company to receive financing from the \r\nExport-Import Bank for machine tool sales of $1.2 million to \r\nRumania.\nAll five academic respondents were contacted. Eckstein reported the \r\ncurrent picture is mixed-retail sales show no signs of a substantial \r\nupward breakout, yet the talk of business fears and uncertainties \r\nhas clearly been exaggerated. Shapiro and Samuelson expect a gain of \r\nabout $100 billion in GNP in 1972. Shapiro anticipates rates on new \r\nissues of Aa bonds to decline to about 6. 5 per cent by June of next \r\nyear, and found no reason why long rates would rise in the second \r\nhalf of 1972. Tobin and Wallich expressed skepticism about the $100 \r\nbillion gain in GNP. Wallich anticipates an $85 billion gain with \r\nlong rates falling and short rates rising only at the end of the \r\nyear.\nShapiro sees considerable progress in the international monetary \r\nsituation. He specifically disputed analogies which have been drawn \r\nbetween the present situation and 1929. The major difference between \r\nthe two periods is that countries now know much more about how to \r\nmanage aggregate demand. Samuelson stated that the needed change in \r\nexchange rates was a big one, and warned against premature \r\nsettlements based on minor realignments. He urged that monetary \r\npolicy not be used to offset any downward pressure on the dollar.\nWith regard to the recent lack of growth in the money stock, \r\nProfessor Wallich said that the drop in inflationary expectations \r\nhad reduced the demand for working capital and therefore for \r\nborrowing. The Fed should take advantage of this opportunity to \r\n\"gather reserves\" so that it can afford to expand if it became a \r\npolitical necessity to hold down interest rates. If rates were to \r\nstart to rise, however, the Fed must be mindful that it has very \r\nlimited leeway to keep rates down.\nBoth Shapiro and Wallich expressed strong agreement with Governor \r\nMaisel's recent speech. Wallich indicated that 5 to 6 per cent rate \r\nof monetary growth would not allow for sufficient real growth, since \r\nthe upper limit of velocity growth would be about 2 to 3 per cent, \r\nparticularly in light of falling interest rates. Tobin felt that 6 \r\nto 8 per cent growth in the money stock would only be accommodating \r\nthe economy's growth, not aggressively pursuing more rapid growth. \r\nSamuelson argued that the simple notion of the desirability of \r\nsmooth growth in the money stock is \"a bad thing.\" He suggested the \r\nFed should be prepared to accept \"choppy\" money supply figures. For \r\nexample, if foreign governments should wish to hold substantially \r\nfewer U.S. securities, an irregular bulge may be expected to \r\nappear.\nEven with a $100 billion GNP gain and real growth of just under 6 \r\nper cent, Eckstein calls the 1972 script an inadequate social \r\npolicy. Basic business confidence will be \"great,\" there will not be \r\na \"boom economy\" or dangers of excess demand inflation, and \r\nunemployment will not drop substantially. Next year will be a replay \r\nof the early 1960's, only worse. The problem for monetary policy, \r\nEckstein argued, was how to move interest rates down without \r\nexcessive expansion in liquidity. He projects long rates to drift \r\ndown only slightly and then to rise.\nWallich suggested that a floating prime rate was capable of \r\nconsiderable mischief\u2014that there was danger of a precipitous upshot. \r\nHe urged the Federal Reserve System to study this problem.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-12-cl

"Beige Book Report: Cleveland\nDecember 8, 1971\nSluggish conditions in the steel industry and labor-management \r\ndisputes are among the major factors impeding economic recovery in \r\nthe District. High imports and low domestic consumption are \r\nprolonging the steel inventory liquidation. Several of our directors \r\nare concerned about international financial uncertainties, and \r\ndomestic uncertainties regarding congressional legislation and Phase \r\nII. Finally, many District bankers report recent high rates of \r\nconsumer-type savings inflows, but general reluctance to cut \r\ninterest rates on those savings.\nThe depressed state of the steel industry and\nlabor-management \r\ndisputes (coal mining, office machinery, and glass, among others) \r\nwere largely responsible for District nonfarm payroll employment \r\ndropping to a new cyclical low in October, following an upturn in \r\nSeptember. Declines occurred in both the manufacturing and \r\nnonmanufacturing sectors. Our electric power index of manufacturing \r\noutput, which had started to recover in September, also declined \r\nsharply in October. The index has declined in four out of the past \r\nsix months and is now about 5 per cent below the level of last \r\nspring. Even after allowance for strikes, the pace of recovery in \r\nthe District remains sluggish. As of October, total nonfarm payroll \r\nemployment and manufacturing employment were both below the levels \r\nrecorded at the trough of the past recession. In mid-November, the \r\nDistrict's insured unemployment rate was still high by historical \r\nstandards (more than three times the pre-recession level). With \r\nfurther layoffs in the steel industry reported after mid-November, \r\nespecially in the Pittsburgh-Wheeling-Steubenville area, overall \r\nunemployment is likely to remain at a high level through yearend.\nEconomists from three major steel companies informed us that the \r\ninventory liquidation phase is being prolonged, partly because of a \r\nhigh rate of steel imports since the steel settlement, and also \r\nbecause of a lower-than-expected level of steel consumption in the \r\ncurrent quarter. All the steel economists said orders are gradually \r\nimproving, but the auto industry is still not placing normal orders. \r\nImports are expected to exceed 17 million tons this year, compared \r\nwith the 15.4 million ton voluntary quota. (Countries that did not \r\nagree to the quota, such as Canada, Sweden, and Great Britain, are \r\npartly responsible for the excess of steel imports; some EEC \r\ncountries have also overshipped; but Japan is still within her \r\nquota.) The steel economists expressed the opinion that general \r\nconfusion about prices has resulted in very little price-hedge \r\nbuying of steel.\nThe reports of some of our directors also indicate that the current \r\neconomic situation is sluggish and that the \r\noutlook\u2014to the extent \r\none can compensate for uncertainties\u2014is somewhat brighter. The \r\ndirectors believe that the new economic policy has been deflationary \r\nthus far. Uncertainties about congressional legislation and \r\nimplementation of Phase II have resulted in a postponement of \r\ndecisions regarding capital spending projects. Uncertainties with \r\nrespect to foreign exchange rates, according to one director, are \r\nseriously hampering his firm's export orders. Another director, \r\nhowever, reported that his company recently received a $300 million \r\ncontract to provide nuclear reactors for Spain. Much of the work, \r\nincluding designing, engineering, and manufacturing, will be done in \r\nthe Pittsburgh area over the next five years.\nBankers report renewed growth of consumer time and savings deposits \r\nsince October, which they attribute to the lower level of competing \r\nmarket interest rates. However, there appears to be little \r\nlikelihood of a cut in bank interest rates on consumer time \r\ninstruments. (One banking director and several officers of smaller \r\nbanks and savings and loan associations noted that the savings \r\ninflow is too heavy to justify current interest rates paid, but no \r\nbank has been willing to take the lead in adjusting rates downward.) \r\nNo change in business loan demand has been detected. Real estate, \r\nconsumer installment, and commercial and industrial loans to local \r\ncustomers are all growing rapidly; but business loans to large \r\ncorporate customers, especially those with access to the commercial \r\npaper market, continue at their recent slow pace.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-12-ri

"Beige Book Report: Richmond\nDecember 8, 1971\nResults of our regular survey of businessmen and bankers in the \r\nFifth District indicate that the moderate expansion in business \r\nactivity evident in the last several months is still under way. \r\nManufacturers report increases in shipments, new orders and backlogs \r\nof orders, and retail sales continue relatively strong. Construction \r\nactivity is not as vigorous as it has been in recent months, with \r\nsome slackening in residential construction being especially \r\nevident. Loan demand continues to follow the pattern set in recent \r\nmonths, with consumer loan demand especially strong.\nIn general, District manufacturers report that shipments, new \r\norders, and backlogs of orders are up over the previous reporting \r\nperiod. Increases are reported in such industries as furniture, \r\ntextiles, chemicals, and electrical equipment, while decreases are \r\nreported by hosiery, apparel, and synthetic fiber producers. \r\nManufacturers' inventories were reported to have increased slightly \r\nfor the first time in several months and the level of inventories, \r\nrelative to desired levels, showed some improvement over last month.\nAlthough the long coal strike dampened business activity in some \r\nareas, on balance District bankers and businessmen in trade and \r\nservices report that retail, sales are up in their areas. Further \r\nincreases in automobile sales were also reported. Retailers' \r\ninventories declined substantially from the previous reporting \r\nperiod and the proportion of retailers reporting inventory levels \r\ntoo high declined sharply.\nContrary to the situation in the previous months, manufacturing \r\nrespondents and District bankers report increases in employment, and \r\nmanufacturing hours worked per week showed a slight increase over \r\nlast month. Trade and services respondents indicate a continuation \r\nof the increase in employment which began two months ago. On \r\nbalance, banking respondents report no change in the available labor \r\nsupply in their areas.\nAlthough several manufacturing and trade and services respondents \r\nreported that prices received had decline, the overwhelming majority \r\nof respondents reported no change in prices received. Price declines \r\nwere especially evident among metal producers. No price increases \r\nwere reported. There was a sharp increase in the number of \r\nmanufacturing and trade and services respondents reporting increases \r\nin wages paid.\nResponses from District bankers suggest some further slackening in \r\nboth residential and nonresidential construction. For the first time \r\nin several months, the number of banks reporting a decline in \r\nresidential construction in their areas was greater than the number \r\nreporting an increase. Although loan demand varies considerably from \r\narea to area in the District, demand for business and mortgage loans \r\ngenerally continues to follow the pattern of recent months. The \r\nnumber of bank respondents reporting an increase in the demand for \r\nconsumer loans increased substantially over the previous period.\nDistrict farmers' cash receipts from farm marketings during January-September were 1 per cent below those a year earlier, with a 5 per \r\ncent decline in livestock receipts more than offsetting a 3 per cent \r\ngain in receipts from crops. Quality of the 1971 flue-cured tobacco \r\ncrop was noticeably better than last year's, demand was strong, \r\ngrade prices were the highest in history, and the general average \r\nprice was at an all time high-some 8 per cent above the 1970 \r\naverage.\nThe general economic outlook of survey respondents remains \r\nfavorable. Approximately 60 per cent of the banking respondents \r\nbelieve that an increase in general business activity is likely over \r\nthe next three months.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-12-ph

"Beige Book Report: Philadelphia\nDecember 8, 1971\nIn general, business conditions in the Third District are sluggish, \r\nalthough the outlook over the next six months remains optimistic. \r\nKey manufacturing indicators, such as new orders and sales, have \r\nshown little change in the last month. The consumer sector shows \r\nnormal seasonal patterns as does business loan demand at area banks. \r\nHowever, District manufacturers and economists see increased \r\nactivity by next spring. Price increases in the District seem to \r\nhave leveled off, and area businessmen do not anticipate a \r\nresurgence of inflation in the near future.\nDistrict manufacturers polled in the Bank's monthly business outlook \r\nsurvey generally assessed business activity as unchanged from \r\nOctober. Most of the key indicators for November, such as new orders \r\nand sales, were essentially flat. Virtually no companies reported \r\nthat they had added employees during the month. And the \r\nmanufacturers expect the lull to continue in the immediate future. \r\nOver half see no change in new orders and over 80 per cent expect to \r\nadd no additional employees during December.\nA majority of the manufacturers remain optimistic about the longer \r\nrun; however, approximately two out of three anticipate a jump in \r\nsales and new orders by next spring, while almost one-fourth of the \r\nexecutives canvassed intend to add employees to their payrolls \r\nduring this period. Nearly 25 per cent plan to increase capital \r\nexpenditures six months out. The longer-run optimism also is picked \r\nup by area business and bank economists. They expect a 9.6 per cent \r\ngrowth in GNP during 1972, with about two-thirds of that expansion \r\nrepresenting a real gain in output. The economists also predict that \r\nbusiness spending will be a major factor in the expansion, \r\nespecially in the last two quarters of 1972. Fixed investment is \r\nforecasted to rise at an annual rate of 6. 7 per cent during the \r\nfirst half of 1972, and 12 per cent during the second half.\nSigns in the consumer sector are somewhat mixed. Members of the \r\nBank's Board of Directors find no observable upsurge in consumer \r\nconfidence. There appears to be a normal seasonal increase in retail \r\nsales, although retailers are not especially bullish. Area bankers \r\nreported a gradual upward trend in consumer credit during the last \r\ntwo months. Looking ahead, area economists expect that consumer \r\nspending will rise about 9 per cent during 1972, with outlays for \r\ndurable goods setting the pace. Private housing starts are expected \r\nto level off in 1972 after a strong finish in 1971.\nBusiness loan demand at area banks appears to remain seasonal in \r\nnature, with some strength in retail and nondurable goods sectors. \r\nMost customers appear to show neither great optimism nor pessimism, \r\nbut retain the\nwait-and-see attitude.\nOn the price front, nearly 90 per cent of the District manufacturers \r\npolled reported no change in prices for November, and over 80 per \r\ncent expect that trend to continue through December. Furthermore, \r\nthe percentage of businessmen expecting price increases six months \r\nahead has dropped substantially since July, the last full month \r\nbefore the freeze. Area economists expect that the rate of increase \r\nfor consumer prices will slow to just under 3 per cent for the \r\nsecond half of next year, compared with 3.7 per cent for the first \r\nhalf.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-12-at

"Beige Book Report: Atlanta\nDecember 8, 1971\nAn improvement in business sentiment has occurred during the past \r\nsix weeks, at least among businessmen located in areas of the \r\nDistrict that have usually been relatively prosperous. For example, \r\nmost attendees of a recent meeting of Nashville business leaders \r\nagreed that pessimism has been exaggerated, and that business was \r\nnot as bad as it has been made out to be. A Tennessee director \r\nclaims that optimism in his area is greater than at any time in tile \r\npast few years. Directors representing north and central Florida \r\ndescribed prospects, especially in the construction and real estate \r\nfield, in glowing terms. Some businessmen doubt the efficacy of \r\nPhase II because of the large wage increases granted by the Pay \r\nBoard.\nDespite recent reports of overbuilding in some sectors, construction \r\nactivity is reportedly showing strength. A rash of new developments \r\nhas been announced around Orlando, including a residential-commercial development valued at $50 million and another valued at \r\n$20 million. Total real estate activity is running about 100 per \r\ncent above last year's level in the Orlando area, mainly because of \r\nDisney World. There have also been several announcements of large \r\nresidential-commercial developments in the Tampa area, including a \r\n$16 million condominium and two shopping centers costing a total of \r\n$3.2 million. For the third time in the past year, a large parcel of \r\nland along the north Florida Gulf Coast has recently changed hands. \r\nA residential development is being planned for the site. A $43.5 \r\nmillion loan has been secured for the completion of the final stage \r\nof hotel-office-condominium-apartment complex in downtown Atlanta. A \r\nlarge planned residential community has been announced east of \r\nAtlanta, and planned communities are reportedly under consideration \r\nfor two areas southwest of Atlanta.\nConstruction activity is evidently benefiting from an abundant \r\nsupply of mortgage money. Executives of two life insurance companies \r\nclaimed that they are having a difficult time finding investment \r\nopportunities, especially because the demand for mortgage money for \r\ncommercial construction has been weak. They also report that real \r\nestate investment trusts are beating the bushes for opportunities to \r\nplace funds.\nThe employment outlook has improved. Disney World will add 2,000 \r\nworkers by Christmas, 1,100 more than originally planned. A tire \r\nplant in central Alabama has recently added 200 workers. Directors \r\nfrom two areas in Tennessee report that unemployment is negligible.\nPlant announcements continue at a modest pace. New chemical plants \r\nwill be built in Vicksburg and Baton Rouge. Construction of a large \r\nseafood packing plant in Brunswick, Georgia, has begun. A life \r\ninsurance company is setting up regional headquarters in \r\nJacksonville, and two national concerns are reportedly interested in \r\nlocating in the Jacksonville vicinity.\nTwo wage settlements have come to our attention since the end of the \r\nfreeze; they call for first-year raises of 9 and 11 per cent. The \r\nportion of the raises above 5.5 per cent is evidently being held up, \r\npending Pay Board action.\nThe outlook for the citrus industry has reportedly never been \r\nbetter. Although a good crop is expected, demand has been so strong \r\nthat the carry over of frozen orange juice concentrate from last \r\nyear's bountiful harvest is small.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-11-cl

"Beige Book Report: Cleveland\nNovember 10, 1971\nOutput, employment, and unemployment in the district are all showing \r\nsome improvement. Steel industry economists, however, say the \r\nrecovery in their industry is proceeding more slowly than they \r\nexpected a month earlier. Preliminary results of our survey of \r\nmanufacturers' capital spending indicate that substantial increases \r\nare planned for 1972 in the Cleveland and Cincinnati metropolitan \r\nareas. Recently, some of our directors have also reported signs of \r\nstrengthening in a number of areas, but signs of sluggishness in \r\ncertain capital goods areas persist.\nOur index of manufacturing activity turned up in September, \r\nfollowing sharp declines in July and August. On the other hand, the \r\nnationwide coal strike that began on October 1, which involved \r\n80,000 workers, is having a severe impact in mining activity in the \r\ndistrict. (The Fourth District accounts for more than one-third of \r\nthe nation's bituminous coal production.) Nonfarm payroll \r\nemployment also rose in September, following three consecutive \r\nmonthly declines. The district's insured unemployment rate rose \r\nnoticeably from June to September, and then started to decline in \r\nOctober. However, unemployment is still high in some metropolitan \r\nareas, particularly steel centers.\nEconomists from four major steel companies in the district all \r\nreported an improvement in new orders last month, but they \r\nemphasized that the orders were well below normal October levels. \r\nSteel orders from the auto industry continue to be sparse. The auto \r\ncompanies are talking about resumption of normal ordering in \r\nDecember for January delivery, but they will not say how much. \r\n(\"Normal\" depends on the schedule for auto production.) Apparently, \r\nthe auto companies are being cautious because of uncertainty about \r\nthe course of new car sales after the price freeze ends. The \r\neconomists noted that steel consumption, in general, has been \r\nrunning below their earlier expectations, and that the economy has \r\nto show more improvement than it has recently exhibited to get the\r\nsteel industry back to a reasonable level of operations. A heavier \r\nthan expected volume of imported steel is retarding customer \r\ninventory liquidation and prolonging sluggishness in domestic \r\norders. The consensus is that it will be February or March before we \r\ncan expect to have \"normal\" steel output.\nPreliminary results of our semi-annual capital spending survey show \r\nthat in the Cleveland area, more manufacturing firms have reduced \r\nthan raised their spending plans for 1971 since our spring survey, \r\nand manufacturing firms are planning a significant rise in the \r\ndollar volume of spending for 1972.\nReports from some of our directors indicate some recent \r\nstrengthening in business activity in a number of areas, while \r\nothers involved with certain types of capital goods report continued \r\nsluggishness. One report of a strong increase in new orders in \r\nrecent weeks came from a director associated with a large computer \r\nand business equipment manufacturer.\nThe improvement was in a number \r\nof the firms' product lines and came from a wide variety of \r\ncustomers. There was some indication that some of the improvement \r\nmay have come at the expense of foreign competition. Another \r\ndirector from a highly-diversified manufacturing firm reported a \r\nrecent widespread improvement in new orders for a number of the \r\nfirms' divisions, but he also noted continued weakness in \r\ngovernment-related business and aerospace activity. Another director \r\nreported that the situation in the machine tool industry remains \r\nextremely depressed and that there are no signs of an improvement \r\nover the near term. This same director noted a growing amount of \r\nskepticism among business associates about the likelihood of success \r\nin holding down wage increases under the administrative structure \r\nset up to direct Phase II of the President's new economic program. \r\nPersistent sluggishness was also reported by a director whose firm \r\nmanufactures a number of specialty gear items; this director noted \r\nthat a recent \"stretch-out\" in the production of rapid transit \r\nequipment had an adverse effect on the firm's sales.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1971/1971-11-sl

"Beige Book Report: St Louis\nNovember 10, 1971\nFollowing a moderate expansion throughout most of the year, business \r\nactivity has tended to level off in recent weeks according to a \r\nsurvey of some leading businessmen. Confusion and greater caution \r\ntend to dominate the thinking of business leaders as plans relative \r\nto Phase II of the Administration's new economic program are \r\ndiscussed. Construction has apparently stabilized at a relatively \r\nhigh level and, as a result, sales of the construction supply \r\nindustries and new home furnishings have likewise stabilized. Retail \r\nsales of the larger department stores have remained unchanged in \r\nrecent weeks, but store managers remain optimistic. Output of major \r\nmanufacturers in the district continues to expand moderately, and \r\nsome new investment plans were mentioned. Both savings flows into \r\nfinancial firms and loan commitments continue up.\nMost of the businessmen interviewed expressed confusion and doubt as \r\nPhase II plans for the Administration's new economic program unfold. \r\nTypical of the expressions was the view of an official of a major \r\nmanufacturing firm who stated, \"I am somewhat negative at the \r\nmoment. We would have been better off without the freeze.\" Several \r\nexpressed the view that the proposed investment tax credit will \r\nhelp, but at the same time expressed doubts that wages will be \r\nmaintained at levels consistent with high investment incentive. \r\nThose interviewed are especially concerned with the confusion \r\nrelative to existing labor union contracts and current\nlabor-management negotiations.\nConstruction continues to provide the major stimulus to the Eighth \r\nDistrict economy. However, after rising sharply during the first \r\npart of the year, it has tended to level off recently. Demand growth \r\nfor building supplies has also slowed. The trend is similar for new \r\nhome furnishings, such as built-in appliances and synthetic fibers \r\nfor carpets.\nMajor manufacturing firms report a continuing moderate uptrend in \r\noutput and sales. Plastics and fibers for the transportation and \r\nhome building industries are well above year-ago levels. Factory \r\nsales of soft goods are likewise higher. Steel is in a slump as a \r\nresult of excessive inventories, accumulated in preparation for an \r\nexpected strike. Leather goods factory sales are also low as a \r\nresult of rising imports, and the turnaround for such goods is \r\nexpected to be slow, despite the surtax on imports.\nMost officials interviewed would like to see more definite economic \r\npolicies before making major changes in their investment plans. Some \r\nreawakening, however, was noted. Two major manufacturing firms \r\nreported expansion projects, and one large retailer, whose outlets \r\nare concentrated in the inner city, reported plans for major \r\nexpansion in the outlying area.\nThe uptrend of savings flows into financial firms and loan demand \r\ncontinues. Despite the announced decline in the prime rate, mortgage \r\nrates generally remain firm at 7 to 7 3/4 percent. Other credit \r\nterms, such as downpayment requirements, however, are apparently \r\neasing.\nThe Eighth District agricultural situation is generally favorable. \r\nWeather conditions were good throughout the production and \r\nharvesting season. Large crops have been produced and harvested, but \r\nstorage facilities are reported to be short in some areas. This \r\nlarger volume of farm products has already been reflected in a \r\nsizable decline of wholesale prices of farm products, and in a \r\nslight decline in the wholesale price of all commodities.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-11-da

"Beige Book Report: Dallas\nNovember 10, 1971\nThe announcement of Phase II of President Nixon's new economic \r\nprogram apparently had little effect upon the thinking of the \r\ndirectors of this bank in terms of leading them to make substantial \r\nalterations in their outlook for economic activity in the region and \r\nnation. Of the 26 head office and branch directors surveyed, an \r\noverwhelming majority now expect economic activity in the nation to \r\nincrease moderately over the next nine months. This was essentially \r\nthe opinion of these businessmen, bankers, and educators prior to \r\nthe President's outline of the control apparatus to be established \r\nunder Phase II. The directors believe that these improving economic \r\nconditions in the nation will produce a moderate decline in the\r\nunemployment rate and be accompanied by moderately rising prices. \r\nBanking directors are now expecting a moderate fall in interest \r\nrates, while industrial directors anticipate no real growth in \r\nemployment, plant and equipment expenditures, or inventory \r\ninvestment for their firms over the near term.\nWith respect to the national economy, almost three-fourths of the \r\ndirectors currently foresee a moderate gain in activity. Prior to \r\nthe disclosure of Phase II, this view was held by slightly more than \r\ntwo-thirds of the directors. The announcement of the Phase II \r\noutline also produced little change in the directors' assessment of \r\nthe unemployment rate. Nearly 60 percent of the directors are still \r\nof the opinion that the unemployment rate will fall moderately. As \r\nfor the present outlook for prices, about two-thirds of the \r\ndirectors expect that moderate increases will occur, and the balance \r\nanticipate that prices will remain essentially unchanged. Until the \r\nPhase II program was made public, about one-fourth of the directors \r\nwere expecting substantial increases in prices, half were \r\nanticipating moderate increases, and the rest were looking for \r\nlittle change. Thus, the consensus of directors, by a small \r\nmajority, is that the creation of the Pay and Price Boards enhances \r\nthe prospect for greater price stability.\nThe outlook for the regional economy was also largely unchanged by \r\nannouncement of the Phase II outline. Eighteen of the directors \r\ncurrently foresee a moderate increase in activity in their local \r\nareas, as compared with 14 earlier. The announcement caused no \r\nalteration in the directors' assessment of the prospects for the \r\nunemployment rate in their local areas. Just over half were (and \r\nstill are) anticipating a moderate decline in the unemployment rate. \r\nThe directors believe that prices will edge upward slightly in the \r\ndistrict. Earlier, directors were somewhat less optimistic about \r\nprices.\nCommercial banking directors were also surveyed on their outlook for \r\nmoney and capital market rates and the commercial bank prime lending \r\nrate. Nine of the 14 commercial bankers now believe that short-term \r\nrates will decline moderately. Prior to the announcement of Phase \r\nII, ten of the respondents thought rates would remain essentially \r\nunchanged or increase moderately. Their evaluation of the prospects \r\nfor long-term interest rates has also improved slightly. A clear \r\nmajority now anticipate that capital market rates will either remain \r\nunchanged or decline moderately over the next nine months. Over the \r\nsame period, half of the banking directors believe the prime lending \r\nrate at their banks will decrease moderately, 43 percent forecast no \r\nchange, and 7 percent think that a moderate increase is in the \r\noffing.\nDirectors associated with nonbanking businesses were surveyed with \r\nrespect to the outlook for their firms and industries. The \r\nannouncement of Phase II caused virtually no change in the \r\nassessments of eight businessmen-directors as to their outlook for \r\nemployment, prices, plant and equipment expenditures, and \r\ninventories over the next nine months. A majority believe that \r\nemployment, plant and equipment expenditures, and inventories for \r\ntheir firms will remain unchanged, and that the prices of output of \r\ntheir firms will increase moderately. Three believe that Phase II \r\nwill have no impact on their profits, four are of the opinion that \r\nprofits will decline moderately, and only one anticipates that \r\nprofits will be improved.\nOther directors were asked to assess the reception of Phase II in \r\ntheir respective areas. Three out of the four directors in this \r\ncategory indicated that the program was very well received. With \r\nrespect to the relative impact of the stabilization programs, two of \r\nthe directors feel that Phase II favors labor, one director believes \r\nthat the program benefits consumers, and one is of the opinion that \r\nbusiness is favored.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-11-ch

"Beige Book Report: Chicago\nNovember 10, 1971\nThe economic picture in the Seventh District continues to be \r\ncharacterized by strength in consumer durable goods and in \r\nresidential construction; contrasted by weakness in producer goods, \r\nnonresidential construction, and inventory investment. Uncertainty \r\nover Phase II may be dampening and delaying a restoration of \r\nbusiness confidence, and, therefore, of expansionary business \r\npolicies. District labor markets are soft and, overall, do not \r\nappear to be improving. Credit is readily available in all \r\ncategories, but, except for consumer auto loans, demand for credit \r\nis not vigorous, and, in the case of residential mortgages, has \r\nweakened recently.\nManufacturers of appliances, color television sets, and furniture \r\nhave increased output in response to larger retail sales. In part, \r\nthese developments reflect the rise in newly completed residences, \r\nand the continued high level of output of mobile homes, which are \r\nshipped furnished. But retailers, generally, express optimism on \r\nprospects for sales in the oncoming Christmas season. Auto output \r\nschedules are being raised modestly, indicating that producers do \r\nnot view the surge of auto sales merely as a temporary phenomenon \r\nassociated with the price freeze and the import surcharge.\nAlthough businessmen typically offer public endorsements for the \r\noptimistic general forecasts made by professional forecasters, there \r\nis widespread skepticism. Current trends in investment policy\u2014both \r\nfor inventories and for fixed capital\u2014and in hirings and other \r\ndecisions requiring cash outlays, suggest lack of confidence in the \r\ngeneral forecasts. (This may, of course, make the upsurge all the \r\nmore vigorous once momentum is gained.)\nUncertainty over Phase II will not be resolved simply by \r\npromulgation of broad guidelines. Questions relate to the \r\nrelationship of price increases and wage increases which, in large \r\ndegree, will determine profits; to the methods of enforcement and \r\nthe machinery for adjudication of disputes. The poor performance of \r\nthe stock market is cited as evidence of this uneasiness. In \r\naddition, some influential bankers and businessmen are listening to, \r\nand repeating, forecasts of a general decline in activity offered by \r\nconsultants and commentators.\nPart of the current uncertainty could be relieved by favorable \r\naction by Congress on pending NEP legislation. But the effect of the \r\ntax credit and depreciation reform is emphasized by sellers rather \r\nthan buyers of equipment.\nSteel orders are said to be slow, unsteady, and disappointing, but, \r\nnevertheless, basically on the uptrend. Total orders for producer \r\ngoods (finished goods and components) are, at best, holding steady. \r\nSales of trucks, in contrast, have been excellent, reflecting some \r\nof the same factors encouraging auto sales. Producers of both farm \r\nand construction machinery report a sharp decline in sales abroad in \r\nrecent months\u2014a trend that predated August 15. (A large part of \r\nthese sales are from European factories.) Softness in markets for \r\nproducer equipment is cited as evidence that prices would not have \r\nbeen raised even if it were not for the freeze. From the buying \r\nside, planned investments of many manufacturing firms are well below \r\npeaks of past years. Work in hand by plant design firms is at a very \r\nlow ebb. Utilities are moving ahead with expansion programs that are \r\nfar from complete.\nReports from real estate brokers, mortgage lenders, and title \r\ninsurance firms indicate a more-than-seasonal slowing in demand for \r\nresidential mortgage loans, starting in late September. Sales of \r\nhousing units, especially existing units, have weakened, and some \r\nbuilders have reduced plans for starts in 1972. Credit is said to be \r\nreadily available at stable rates, so the situation reflects some \r\neasing in demand for housing. Increased vacancies had been noted \r\nearlier in luxury apartments, but the recent development includes \r\nall types of housing.\nIn the farm sector, income of livestock feeders is up because of \r\nhigher prices for animals coupled with reduced feed costs. But crop \r\nincome is down sharply because of plummeting corn prices. Harvesting \r\nis well-advanced in most areas, and crops are excellent. Meat \r\npackers find the freeze burdensome because of varying seasonals and \r\nother complications associated with joint products. The ceiling \r\nprice on hides is causing shortages because of increased foreign \r\ndemand.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-11-at

"Beige Book Report: Atlanta\nNovember 10, 1971\nBased on a recent Research Department survey of 21 business leaders \r\nand other contacts, support for the new economic program remains \r\nstrong among businessmen and labor rank and file. However, there are \r\ndoubts about the efficacy of Phase II because top labor officials \r\nmay not cooperate. The surveyed businessmen believe that prices will \r\nincrease moderately after November 13. They further indicated that \r\nthe President's program has not yet resulted in any significant \r\nchanges in capital spending plans and that consumer sentiment has \r\nimproved only slightly since August. Evidently, no switching from \r\nforeign to domestic suppliers has yet occurred because of foreign \r\nexchange developments.\nSurvey respondents report nearly universal support among businessmen \r\nfor the President's program. However, many businessmen feel that the \r\nprogram will be undermined by an inability of the Pay Board to \r\ncontrol wage increases. Some businessmen expect price controls to be \r\nmore effective than wage controls; many others are uncertain about \r\nhow they will be affected by Phase II controls. The freeze has \r\nevidently caused considerable inequities that will be very difficult \r\nfor Phase II controllers to rectify. A fear was expressed that a new \r\nbureaucracy may result from the program.\nPrice expectations differ considerably among businessmen, but, on \r\naverage, price increases after November are expected to be more \r\nmoderate than before the freeze. A few respondents expect inflation \r\nto take up where it left off, mainly because they do not expect the \r\nPay Board to be effective. More respondents expect scattered price \r\nincreases and a definite reduction in inflation. A paper company \r\nexecutive reports that a scheduled $8 a ton increase in newsprint \r\nprices has been postponed until at least January 1, and that the \r\nincrease will then probably be less than $8. A sales executive for a \r\nsteel firm reports that some producers with a high percentage of \r\nflat rolled steel in their product mix will be in trouble if \r\nscheduled price increases on these products are not allowed to go \r\ninto effect after the freeze. The cotton textile industry is \r\nreportedly not accepting new orders because increases in the price \r\nof cotton during the freeze have increased costs that, temporarily \r\nat least, cannot be passed along to buyers.\nApparently, the President's program has as yet had little effect on \r\ncapital spending plans. Most respondents report no change in \r\ninvestment plans since the beginning of Phase I. However, a \r\ntelephone company has increased its estimates of business activity \r\nin 1972 and 1973, and increased its capital spending plans \r\naccordingly. An electric utility stepped up its purchases of needed \r\nautos and trucks just to take advantage of the freeze. An auto \r\ndealer reports that he is going ahead with a previously postponed \r\nfacility, evidently because of the surge in auto sales.\nA majority of those surveyed report little change in consumer \r\nattitudes since the freeze. However, production of consumer \r\nappliances has reportedly been increased in anticipation of improved \r\nsales, and consumer demand for textile products has increased. \r\nTextile inventories have been reduced substantially at mills and at \r\nthe wholesale and retail levels, and a good expansion of sales is \r\nanticipated \"after uncertainties are removed.\"\nForeign exchange developments apparently have not as yet caused much \r\nswitching from foreign to domestic suppliers. The price spread \r\nbetween foreign and domestic steel has decreased, but no actual \r\nswitching has occurred yet. Cotton exports have been encouraged by \r\nforeign exchange developments, and this has added to upward pressure \r\non the price domestically. A port official reports that the floating \r\nexchange rates have caused only moderate difficulties. A jewelry \r\nstore executive reports that diamond importers are temporarily \r\nholding current stocks off the market in anticipation of price \r\nincreases later. An importer has reportedly shelved plans for a \r\nmajor expansion of facilities because of the 10 percent import \r\nsurcharge. The director of a state board of industry and trade \r\nreports that foreign firms have increased inquiries about plant \r\nsites and joint ventures, as a result of foreign exchange \r\ndevelopments and the import surcharge.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-11-ri

"Beige Book Report: Richmond\nNovember 10, 1971\nThe moderate uptrend noted in district business activity over the \r\nlast several months has apparently been slowed by the prolonged coal \r\nand dock strikes. Our latest survey of manufacturers suggests a \r\nsubstantial reduction in the pace of shipments and declines in new \r\norders and backlogs. Other survey respondents continue to report \r\nstrong retail sales, although the number reporting increases \r\ndeclined from the previous period. District bankers report some \r\ntapering in the recent strong surge of consumer and mortgage loans, \r\nand only moderate increases in business loan demand are indicated. \r\nDistrict crops have suffered severe damage from Hurricane Ginger and \r\nheavy October rains.\nThe diffusion of responses from district manufacturers suggests a \r\ndistinct slowing of activity, although most of the slowing appears \r\nto be centered in lines affected by the coal and dock strikes. \r\nMetals producers, especially in the Baltimore area, report \r\nsubstantial reductions in shipments, new orders, and backlogs. A \r\nnumber of manufacturers in other lines also commented that the \r\nstrikes are adversely affecting their business. Furniture \r\nmanufacturers continue to report a strong orders picture and are \r\ngenerally optimistic regarding the\r\nnear-term future. Except for \r\nhosiery manufacturers, textile producers are also beginning to \r\nexhibit a cautious optimism about the future.\nOur survey indicates that retail sales have been seriously affected, \r\nespecially in West Virginia, by the coal strike. Sales of new cars \r\nare strong in all areas except those immediately affected by \r\nstrikes. Retailers generally appear to be anticipating a record or \r\nnear-record holiday season.\nManufacturing inventories reportedly have declined further, and \r\nwhile nearly one-third of our manufacturing respondents report \r\ninventory levels higher than desired, the overall inventory \r\nsituation appears much improved over three months ago. Trade \r\nrespondents indicate further increases in inventories, but all of \r\nthis appears to be voluntary. Employment in the district has \r\napparently declined somewhat in recent weeks, but this seems to be \r\ndue mainly to strikes. More than one-third of our banker respondents \r\nreported employment declines in their areas. On the other hand, \r\nnearly one-third of manufacturing respondents reported an increase \r\nin the number of hours worked per week. No significant change in \r\nprices received were reported by manufacturing or trade respondents.\nResponses from banks in the district suggest that both residential \r\nand nonresidential construction activity may have slackened some in \r\nrecent weeks. Bankers report only moderate strength in business loan \r\ndemand, and the number of banks reporting increases in demand for \r\nconsumer and mortgage loans were down from the previous month. In \r\nstrike-affected areas, bankers report a sizable increase in \r\nautomobile repossessions and, in general, loan delinquencies.\nThrough November 4, the season's gross returns from\nflue-cured \r\ntobacco marketings were up 5 percent over last year, as 7 percent \r\nhigher average prices offset a 2 percent decline in sales volume. \r\nVirginia and North Carolina crop losses resulting from Hurricane \r\nGinger and heavy October rains have been estimated as $83 million. \r\nDamage to the peanut crop alone is estimated to be $49 million, or \r\n48 percent of the total cash receipts from last year s record crop. \r\nLosses in corn, soybeans, and cotton account for the remaining $34 \r\nmillion.\nLooking ahead, most banking respondents believe that economic \r\nactivity in their areas will either stabilize at present levels or \r\nincrease. Most manufacturing respondents indicated that plant and \r\nequipment capacity relative to desired capacity is about right.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1971/1971-11-kc

"Beige Book Report: Kansas City\nNovember 10, 1971\nEconomic activity seems to be picking up a bit in the Tenth \r\nDistrict, although most firms are being conservative in expanding \r\nemployment and inventory levels. Capital spending intentions in \r\nvarious types of businesses across the district suggest a slight \r\nincrease, on balance, over last year. Investment plans are said to \r\nbe virtually unaffected by the promise of a tax credit. Business \r\nloan demand remains generally soft, and deposits are reported as \r\nsteady. Interviewed bankers and other businessmen are guardedly \r\noptimistic about the economy in 1972, but few really expect a boom \r\nyear. Many executives are apprehensive about Phase II and the wage \r\nincreases that may be allowed.\nJudging from the businesses contacted, economic conditions are \r\nimproving somewhat. Construction contractors report increased \r\nactivity and have been doing some hiring. A manufacturer of small \r\naircraft has recalled some employees. Other firms, however\u2014including \r\na manufacturer who has recently suffered a strike by his \r\nsteelworkers, a major airline, and oil companies\u2014are doing increased \r\nbusiness with fewer workers. With only one exception, reported plans \r\nfor expansion held little promise for adding jobs once capital \r\nadditions are put in place. And while production activity is \r\nincreasing, inventories still are being held down.\nA survey of major utility companies shows continuing expansion in \r\nthis industry. Plans for capital outlays vary from maintaining last \r\nyear's pace to substantial increases over recent rates of growth. \r\nProspects for tax relief are said to make no difference in \r\ninvestment intentions. As in the past, employment is expected to \r\ngrow less rapidly than total services.\nFirms in other industries also are expecting to make new capital \r\noutlays. A large manufacturer of rubber products plans a \r\nmultimillion dollar plant expansion next year. A major agricultural \r\nsupplier reports new plant and equipment expenditures for next year \r\nwill be below those in the recent past because of project \r\ncompletions, but still will total several millions. Two large sugar \r\ncorporations, two big oil refineries, and three steel-using \r\ncompanies all are planning modest additions to plant and equipment \r\nat about last year's pace. None of the reporting executives of these \r\nfirms feel that the investment tax credit has influenced their plans \r\nin more than a very small way. Businessmen feel that Phase I has \r\nbeen a success, and they expect 1972 to be better than 1971.\r\nUncertainty about Phase II\u2014\"waiting for the other shoe to drop\"\u2014is \r\ncomplicating decision-making right now. For example, one \r\nmanufacturer, who normally sets standards for production costs a \r\nfull year in advance, is finding it difficult to do so because \r\nsuppliers are unwilling to quote full-year prices.\nLoan demand at district commercial banks varies considerably from \r\narea to area, but generally continues to follow the pattern of \r\nrecent months. Real estate and consumer installment (especially \r\nauto) loans remain the stronger categories. Several bankers, \r\nmoreover, noted an improvement in the quality of consumer credit-delinquencies in some cases are at record lows. Construction loans \r\nand a few calls on national account lines are the only bright spots \r\nin an otherwise bleak business loan picture. Some bankers look for a \r\nseasonal upswing in business loans over the next two months. One \r\nrespondent mentioned the possibility of an increase in \r\ntransportation business loans in response to the proposed investment \r\ntax credit.\nDistrict bankers report steady deposit figures in the past month. \r\nRates offered for CD money have, in several cases, been set above \r\nmoney center levels by one-eighth to\none-fourth point, but response \r\nhas been only moderate. One banker observed that consumers seem to \r\nbe financing purchases out of savings rather than by borrowing.\nThe \"floating\" of the prime rate was widely applauded as a further \r\nstep toward de-emphasizing that rate. Most district banks are \r\nquoting a 5 1/2 percent prime rate, but they will charge their \r\nnational prime borrowers whatever those firms are paying to money \r\ncenter banks. The district's largest bank has just introduced a new \r\npolicy of not announcing its prime rate. The bank's policy is \". . . \r\nto be very competitive and in fine tune with money market rates.\" \r\nJudging from responses, the rate structure for local non-prime \r\nborrowers has probably not declined in line with national prime rate \r\nreductions.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1971/1971-11-ny

"Beige Book Report: New York\nNovember 10, 1971\nOn the basis of opinions expressed by the directors of the New York \r\nbank and of the Buffalo branch, the mood of rising optimism \r\nregarding the economy that appeared to be emerging last month has \r\nnow been replaced by a significantly more subdued outlook. Much of \r\nthe current assessment of the business situation is heavily \r\nconditioned by the uncertainties surrounding Phase II and, to a \r\ncertain extent, by developments in the foreign exchange markets. \r\nMost felt that business activity would pick up in 1972, but, on \r\nbalance, the sentiments expressed in this connection were cautious, \r\nand most looked for only a moderate increase.\nRegarding consumer spending, the retailers that were contacted \r\nreported that business was better than last year but not very much \r\nso. They looked for a good Christmas season, but were only \r\n\"conservatively optimistic\" regarding sales over the coming months.\nVirtually all the directors of the New York bank and of the Buffalo \r\nbranch, moreover, saw no significant change in business capital \r\nspending plans. Among the New York bank directors, the chairman of \r\nthe board of a large manufacturing concern felt that, at most, there \r\nmight have been \"some minor upward revisions.\"\nAnother director, a Rochester businessman, basing his comment on \r\nconversations with major manufacturers in the Rochester area, noted \r\nthat the plans made in 1970 for 1972 had not been greatly changed. \r\nSimilar sentiments were expressed by other directors. The chairman \r\nof the board of a large New York City bank felt that the 9 percent \r\nincrease in plant and equipment spending in 1972 indicated in the \r\nEdie survey was \"optimistic,\" while most of the Buffalo directors \r\nfelt that the 1972 increase would be closer to 6 or 7 percent than 9 \r\npercent. The Buffalo directors pointed to the uncertainties \r\nsurrounding wage and price controls and the high rate of unutilized \r\ncapacity as deterrents to capital spending. These directors felt, \r\nhowever, that the capital goods spending picture could be improved \r\nby congressional action on an investment tax credit and/or \r\nliberalized depreciation allowances, which would clear away some of \r\nthe present uncertainties.\nIn general, most directors felt that, apart from some instances of \r\nstock piling, their own businesses had not been appreciably affected \r\nby developments in the foreign exchange markets, the 10 percent \r\nsurcharge and the dock strikes.\nSeveral of the Buffalo directors noted that domestic automobile \r\nsales had been \"unusually brisk,\" a development they attributed at \r\nleast in part to the import surcharge. The chairman of the board of \r\na large New York City bank, however, was more pessimistic: he \r\nreported growing evidence, including a decline in foreign \r\ncollections and in new import credits at his bank, that developments \r\naffecting foreign exchange and trade are having a detrimental effect \r\non business and cited reports that some contracts have been held up \r\npending the clarification of the international financial situation.\nMuch uncertainty was expressed about the effectiveness of Phase II \r\n(opinions expressed predate the Pay Board's 5.5 percent decision). \r\nIn general, the directors had a \"wait and see\" attitude. The \r\npresident of an upstate bank characterized the situation as \r\n\"confusion compounded by concern.\" The Buffalo branch directors \r\nexpressed considerable uneasiness regarding labor union leadership's \r\napparent tough stand against effective wage controls, and its \r\npotential impact on any future wage control program.\nAgainst this background, while most directors looked for some \r\nincrease in economic activity, sentiments as to the extent of the \r\nrecovery were mixed. Among the \"bullish\" minority, the vice \r\npresident of Rochester's largest firm predicted a growth in GNP of 9 \r\nto 9 1/2 percent in current dollars over the next six months, citing \r\nthe end of the inventory adjustment process and normal cyclical \r\nforces as the reasons for his optimism. The former chairman of the \r\nboard of a large oil corporation also thought there would be a \r\nsignificant business upturn if the international financial situation \r\nis straightened out. The majority of the directors, however, were \r\nmore cautious and, in general, linked their opinion regarding the \r\npotential advance to the extent of the success of Phase II.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-11-mi

"Beige Book Report: Minneapolis\nNovember 10, 1971\nThe consensus response to our monthly phone survey of Federal \r\nReserve bank directors is that district consumers have not yet \r\nreduced their savings rate or begun to spend accumulated savings. \r\nThe district's strong increase in housing construction has \r\nstimulated sales of furniture, home furnishings, and appliances, and \r\nthese retailers are quite optimistic about the future. Directors are \r\nunaware of any pressure for large pay increases after November 12, \r\nbut generally feel that previously negotiated pay hikes will have to \r\nbe granted. District manufacturers foresee their sales improving in \r\nthe fourth quarter and during the first half of 1972.\nAlthough one director detected some decline, the consensus was that \r\nthe savings rate of district consumers has not yet been reduced. \r\nMost directors reported that savings deposits have continued to \r\nrise, and one director disclosed that his bank had just concluded \r\nits most successful promotion to attract new savings accounts. \r\nSkepticism was also expressed as to whether or not district \r\nconsumers would start to spend accumulated savings. However, one \r\ndirector did indicate that he expected the savings rate would come \r\ndown and that consumers would start liquidating accrued savings.\nDistrict housing unit authorizations in the four-month period ending \r\nin September were 29 percent above a year ago, and bank directors \r\nreport that this has stimulated district sales of furniture, home \r\nfurnishings, and appliances. One director revealed that furniture \r\ndealers in his area have a backlog of deliveries, and that furniture \r\nmanufacturers are having some difficulty filling orders. Several \r\ndirectors also indicated that retailers expect furniture and home \r\nfurnishing sales to continue to improve.\nBank directors detected no pressure in their areas for large pay \r\nincreases after November 12. One stated that workers in his area \r\nwere just anxious to retain their present jobs and maintain their \r\ncurrent incomes. Two directors felt that union members would be \r\nwilling to settle for smaller pay increases than labor leaders are \r\ndemanding, while another indicated that a union he deals with is not \r\ntoo concerned about pay board guidelines as it feels it has the \r\npolitical clout to eventually surpass them.\nDirectors generally believed that after November 12 workers would be \r\nreluctant to sacrifice any previously negotiated wage increases \r\nwhich were foregone during the freeze. According to one, workers in \r\nhis area might be willing to give up retroactively-paid increases \r\nbut would expect to receive the higher wages after the freeze. \r\nAnother stated that differences between pay board guidelines and \r\nnegotiated wage increases would eventually have to be given to \r\nworkers. Previously negotiated wage increases were considered to be \r\nlegal commitments which have to be honored by another director.\nAccording to the preliminary results of our fourth-quarter \r\nindustrial expectations survey, district manufacturers continue to \r\nexpect that their sales growth will improve in the fourth quarter \r\nand during the first half of 1972. After surpassing year-earlier \r\nlevels by 5.2 percent during the third quarter, district \r\nmanufacturing sales are expected to be up 9.7 percent from a year \r\nago in the current quarter before advancing 8.2 percent during the \r\nfirst half of 1972. The current sales predictions are very close to \r\nthose made for their respective quarters in the third-quarter \r\nsurvey.\nThe optimistic outlook for district manufacturing sales can be \r\nattributed to a rejuvenation in durable goods sales. In the third \r\nquarter, district durable goods sales surpassed\nyear-earlier levels \r\nfor the first time in a year and are expected to strengthen during \r\nthe forecast period. Much of this expected improvement can be traced \r\nto the district's lumber and wood products, electric and nonelectric \r\nmachinery, and scientific instrument industries. No significant \r\nincrease in the rate of sales gain is foreseen by district \r\nnondurable goods manufacturers.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nNovember 10, 1971\nAccording to our directors' reports, economic activity in the \r\nTwelfth District is continuing to grow at a steady pace. Most of the \r\nstrength continues to come from the consumer sector and \r\nconstruction, particularly residential building. The end of the West \r\nCoast dock strike is another favorable factor for many businesses' \r\nprospects. On the other hand, there is no sign of any vigorous \r\nupswing in business capital expenditures beyond recent levels.\nSignificant increases in consumer spending occurred in October. In \r\nsome cases, retailers reported increases 15 percent over the \r\nprevious year's sales, including consumer durables, whose sales had \r\nbeen slow. Auto sales are also stronger. Much of the increase \r\nreported occurred in September, and sales seem to be somewhat slower \r\nin October. Domestic car dealers expect a good year, and their \r\nprincipal concern seems to be slowness in deliveries from the \r\nfactory. Foreign car dealers, in contrast, are less optimistic \r\nbecause of the effects of the import surcharge and the disruption \r\ncaused by the dock strike in delaying shipments of new cars.\nConstruction activity is the other important source of strength. \r\nActivity is centered on single-family building, while construction \r\nof multifamily units is slowing because of higher vacancy rates. The \r\ncontinued inflow of funds, particularly into savings institutions, \r\nhas insured a steady flow of finance to builders at somewhat lower \r\ninterest rates. One director in southern California reported that \r\nthis ready availability of funds is encouraging further building of \r\nmultifamily units, despite a local surplus.\nUnemployment rates continued near 12 percent in the Seattle-Tacoma \r\narea. According to some of our Seattle directors there is no \r\nevidence that unemployment will be reduced in the immediate future, \r\nand it is expected to increase seasonally during the coming winter \r\nmonths. The area has a considerable surplus of warehouse and office \r\nspace. Although some businesses, particularly those which are \r\nmedium-sized and serving national rather than regional markets, are \r\ndoing well, they are not able by themselves to bring about any major \r\nreduction in local unemployment.\nOur directors were asked to assess the prospects for increased \r\ncapital expenditures in the light of recent changes in economic \r\npolicy. The general consensus was that there would be no immediate \r\nincrease; current projects were being carried through, but few \r\nrevisions of plans have occurred. The explanation was that \r\nuncertainty about the policies to be followed in the so-called Phase \r\nII has led businesses to be cautious until the direction of policy \r\nis known. Once the wage and price guidelines are established, they \r\nshould be more willing to undertake increased investment. Only one \r\ndirector reported actual examples of increases, but both of these \r\nprojects were contingent upon the passage of the tax benefits \r\nproposed by the President, and in any event both projects are \r\nscheduled for a 12-month completion date.\nDistrict agriculture has been experiencing a good year in terms of \r\nmarket prices and yields. The exclusion of agricultural prices from \r\nthe price freeze has not resulted in any jump in market prices. In \r\npractice, the inability of buyers of farm products to pass along \r\nprice increases has limited the prices they are willing to pay. One \r\ndirector reports that livestock prices have been held to 3 to 5 \r\npercent below the ceilings for dressed meat.\nBanks' deposits have been gradually rising. On the loan side, the \r\ngreatest demand has been for consumer installment credit and real \r\nestate mortgages. Commercial loans have not been showing any \r\nstrength in most parts of the district. With the exception of minor \r\nreductions in interest rates, the lending and investment policies of \r\nthe district banks have been basically unchanged during the past \r\nmonth.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nNovember 10, 1971\nThe economic picture presented by the Red Book reports is that the \r\nprice freeze is working, but that uncertainties concerning Phase II \r\nare hampering business planning. Consumers are spending more freely, \r\nespecially on durables, but demand for most producer goods remains \r\nvery sluggish, and inventory investment policies are cautious. \r\nEmployment in most districts does not appear to be improving \r\nsignificantly. Credit is generally available in all leading \r\ncategories, and interest rates are lower. Two banks (Chicago and San \r\nFrancisco) report recent evidence that the housing boom has lost \r\nmomentum.\nMost reports indicate that a gradual improvement in general activity \r\nis under way that will probably accelerate in 1972. But there are \r\nnotable exceptions. Richmond reports a \"substantial reduction in the \r\npace of shipments and orders, reflecting, in part, the coal and dock \r\nstrikes. Cleveland finds the coal strike a depressing influence. New \r\nYork finds that \"optimism (is) significantly more subdued.\" St. \r\nLouis states that \"activity has tended to level off.\" A Boston \r\nacademician warns of a \"downward spiral.\" Cleveland, on the other \r\nhand, reports general improvement, and, uniquely, finds evidence of \r\na substantial rise in capital outlays.\nLack of conviction as to prospects for future prosperity was \r\ncharacterized in a variety of clichs of limited descriptive power\u2014e.g., \"cautious optimism,\" \"wait and see attitudes,\" and \"waiting \r\nfor the other shoe to drop.\" Business firms are cautious on \r\ninventories (Kansas City) hirings (Dallas and Philadelphia), and \r\nexpansion of short-term debt (several banks).\nAtlanta tells of cotton textiles producers not accepting orders \r\nbecause of higher cotton prices, and other specific problems are \r\ncited in connection with the freeze. Uncertainty over Phase II is \r\nnot simply a matter of a desire for action by Congress and the new \r\nregulatory bodies. Businessmen worry that prices may be controlled \r\nmore effectively than wages. Lenders are concerned that if interest \r\nrates decline further, increases in rates will not be allowed when \r\nloan demand strengthens.\nSeveral banks found that purchasers of capital equipment do not view \r\nthe investment tax credit as a significant stimulus to capital \r\nspending under current conditions. Requirements of utilities for new \r\nfacilities remain large and will not be deterred by the factors \r\naffecting other sectors. Boston reports that some firms are reducing \r\ncapital outlay budgets.\nThe surge in auto sales, apparently, is universal. Some banks, \r\nincluding Chicago, Minneapolis, and San Francisco, also emphasized \r\nstrong demand for household durables, especially furniture. \r\nIncreased consumer purchases, however, have not significantly \r\nreduced the rate of rise in liquid assets.\nThe trade balance may be improving because of pertinent aspects of \r\nthe NEP. Boston sees evidence of a \"Buy American\" spirit. Atlanta \r\nreports foreign firms have \"increased inquiries about plant sites \r\nand joint ventures.\nChicago, St. Louis, and San Francisco report large agricultural \r\ncrops of good quality. Crop price declines, while resulting in \r\nreduced income for crop farmers, are helping to boost meat \r\nproduction. In the financial area, all banks report credit readily \r\navailable, and generally at lower interest rates. At commercial \r\nbanks, demands for consumer installment loans and mortgage credit \r\nare strong, but demand for business loans is still slow.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-11-bo

"Beige Book Report: Boston\nNovember 10, 1971\nOur directors indicate that their consumer business is continuing to \r\nimprove moderately, and in a few lines spectacularly, while their \r\ncapital goods business is still quite sluggish. None of our \r\ndirectors experienced higher wholesale prices from their suppliers.\nJudging from the sales experiences of our directors' firms consumer \r\nspending is moderately better, but there is no evidence of a buying \r\nspree. The one exception to this general experience is in boating, \r\nwhere dealers are expecting a tremendous boat year in 1972 and are \r\nordering accordingly. These orders are, however, based on \r\nexpectations, not actual sales experience.\nCapital goods producers described business as sluggish in all lines \r\nexcept office and public construction. In some cases directors noted \r\na recent deterioration in orders. One director said that he had just \r\nbecome aware that in the container machinery field, customers were \r\ncutting back their capital budgets. Another director felt that the \r\nrecent downturn in capital goods orders was a result of \r\nuncertainties about investment tax credit.\nSales of intermediate products to the industrial sector were \r\nvariously described as sluggish to poor, especially among suppliers \r\nto the aerospace and chemical industries. Only one director \r\nmentioned that one of his plants was continuing to decrease \r\nemployment.\nOne director noted less foreign competition in the construction \r\nmaterial market, in part due to the surcharge, in part to a new buy-American feeling inspired by the President, and in part due to \r\nexpectations of a tariff increase on these items. The director also \r\nfelt that exchange revaluation had helped his export sales of \r\nmachinery.\nNone of our directors had experienced any price increases during the \r\nfreeze from their suppliers other than steel. Only one director \r\nexpected to raise a product's price imminently, and that was in a \r\nline where the market has been so depressed that even with the price \r\nincrease, the price will be below its May level. One director noted \r\nthat his company's profits were hurt by the price freeze because new \r\nlabor contracts and higher steel prices had gone into effect, but \r\nthe company had been waiting until this autumn to raise prices. This \r\ndirector mentioned that he expected price guidelines of 3 percent, \r\nand he felt that he could get along with that.\nOn the wage front, one firm had a strike which was three to four \r\ndays old. The issues were not completely clear, but among the \r\ndemands was a 300 percent increase in pension benefits. Another \r\ndirector had signed new wage agreements in depressed markets which \r\ncalled for 5 to 7 percent increases, and in some cases even less, \r\nwhich were to go into effect if and when permitted. Another director \r\nnoted that one of his non-union plants should have received a wage \r\nincrease in October, but did not.\nAll five of our academic respondents were available this month, \r\nSamuelson and Tobin in pointed out that, since the NEP was \r\nannounced, the economy, in general, seems to have weakened. Eckstein \r\nand Shapiro, however, both project 1972 GNP just under $1,150 \r\nbillion, with a real growth rate just under 6 percent, but the \r\nunemployment rate well above 5 percent at the end of 1972. Wallich's \r\nexpectation that long-term rates will be falling throughout most of \r\n1972 is based upon a GNP gain of about $90 billion.\nPhase II wage policy is the biggest risk in the outlook at the \r\nmoment according to Eckstein. To stop the previously negotiated \r\nincreases would constitute a \"sharp break with the previous \r\npattern.\" Wallich felt some sacrifices, such as a partial cut or a \r\nstretching out in the deferred wage increases, will be necessary in \r\norder to avoid a spillover effect, which would upset a 5 percent \r\nwage standard.\nThe Federal Reserve System was explicitly excluded as a cause for \r\nthe recent declines in interest rates. Eckstein and Tobin said \r\nmonetary policy has not been all that easy. Monetary policy has been \r\n\"less easy than was thought,\" Wallich stated, because the recent \r\nbehavior of velocity has been overlooked. Wallich now considers a 6 \r\nto 7 percent monetary growth rate as \"modest\" and feels a 7 to 8 \r\npercent growth more appropriate for the present circumstances. He \r\nwould scale this rate down only if it proved so high as to provoke a \r\nrise in long-term market interest rates, or if the rate of inflation \r\ncontinues to subside.\nTobin stressed that the economy is plagued by confusion and \r\nuncertainty and is in some danger of a downward spiral. Since fiscal \r\nstimulus has not yet been enacted and disagreement about Phase II \r\npersists, Tobin urges monetary authority to \"get some expansion \r\nright now.\" Specifically, he advocated pushing the federal funds \r\nrate down to 4 1/2 percent. Shapiro thinks short rates have fallen \r\nso sharply that there are going to be some rises; he feels a \r\nmonetary growth rate of 4 to 5 percent in the next quarter or two \r\nand rising to attain a 6 percent rate in 1972 is appropriate.\nOnly Tobin questioned lowering the discount rate; his reservation \r\nwas that the signal might be \"misinterpreted,\"\ni.e., interpreted as \r\nevidence that the economic situation is a precarious one. Wallich \r\nwould favor a reduction in the discount rate only if it were to be \r\nallowed to go up again in the future. If the lowest level reached is \r\nto become the ceiling level, Wallich thinks it unwise to reduce \r\neither the discount rate, the prime rate, or ceiling rates under\nRegulation Q.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-11-ph

"Beige Book Report: Philadelphia\nNovember 10, 1971\nThe general outlook for conditions in the Third District is one of \r\ncautious optimism. Manufacturing activity still seems somewhat \r\nsluggish although the prognosis for the next six months is an \r\nexpanding regional economy. Consumer activity is on the upswing, and \r\nbankers see loan demand holding its own over the next few months. \r\nMost bankers are in favor of the floating prime in principle, but \r\ndisagree on the mechanics of its implementation. The 4 percent \r\nguideline on dividends is generally well received.\nDistrict manufacturers seem optimistic about the level of general \r\nbusiness activity but remain more cautious about trends for their \r\nown firms. For example, of the firms polled, nearly 50 percent \r\nreport general business activity increasing in October and project \r\ncontinued expansion in November. But at the company level, although \r\nnearly 50 percent indicated increases in new orders and shipments \r\nfor October, only 36 percent were willing to make such a forecast \r\nfor November. In addition, a smaller percentage are planning to \r\nbuild inventories and add workers during November than reported such \r\nactivity for October. The outlook for the longer term is more \r\noptimistic. Nearly 70 percent of the manufacturers foresee the \r\nregional economy expanding a half year ahead. As a result of this \r\nanticipated business expansion, close to 30 percent of the firms \r\nplan to add employees over that time span.\nConsumer activity seems to be picking up steam. One banker noted \r\nthat October had been one of their strongest auto loan months ever. \r\nAnother felt that the strength of the housing market would generate \r\na strong demand for household durables in the next few months. \r\nMembers of the bank's board of directors also see a somewhat \r\nsluggish industrial sector and an active consumer sector. They feel \r\nthat the lack of optimism in the business community is overstated, \r\nand may be the result of yet uncertain Phase II guidelines.\nArea bankers report a gradual trend upward in loan demand, with \r\nstrength coming in the construction, textile, and retail sectors. \r\nThey expect demand to remain stable during the coming months but \r\nconsider that to be good, given the situation for the same period in \r\n1970. Philadelphia banks lowered their prime rate in October, and \r\nsome did again recently. One banker was concerned that bankers would \r\nget little credit for lowering prime now, but would be criticized \r\nlater if demand pressures forced the rate back up. Most bankers were \r\nin favor of the floating prime in principle but questioned the \r\ntiming and mechanics of the plans so far adopted. One bank president \r\nfelt that the public would view the floating prime as an effort to \r\navoid controls. Another thought it should be tied more closely to \r\nthe cost of bank funds (fed funds or CDs) than to other open market \r\nrates.\nThe board of directors, in general, is pleased by the 4 percent \r\nguideline set for dividends since it recognizes the need for \r\ndividend flexibility. However, a few members wonder if the guideline \r\nmight not cause dividends to move higher than they otherwise would. \r\nThey argue that the 4 percent maximum may become an \"expected\" 4 \r\npercent so that corporations feel compelled to give their \r\nstockholders as much as possible under the guideline.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1971/1971-10-ny

"Beige Book Report: New York\nOctober 13, 1971\nThe improved economic expectations voiced last month by the \r\ndirectors of this Bank and of the Buffalo Branch and by other \r\nbusiness leaders continue to be in evidence. A better outlook was \r\nseen in the retail trade sector, including automobiles. The \r\nemployment picture was mixed, with some slight improvement in \r\ncertain areas. Compliance with the \"freeze\" was reported to be very \r\ngood, despite some wage dissatisfaction and some price evasion.\nThe great majority of the directors of this Bank and of the Buffalo \r\nBranch felt that the 90-day wage-price freeze had been very well \r\nreceived. One director, the chairman of the board of a large \r\nmanufacturing concern, did feel that a \"head of steam\" was building \r\nup on wage demands, resulting from contractual obligations and cost-of-living increases that had been set aside during the freeze.\nTwo directors referred to the growing bitterness of teachers whose \r\nwage increases were denied just as the new school year began. Most \r\nrespondents felt that the wage-price freeze had been very effective, \r\nwith nearly 100 percent compliance. However, a director of the \r\nBuffalo Branch mentioned that an apparel retailer had told him that \r\nsome manufacturers are \"violating the spirit, if not the letter\" of \r\nthe freeze by making minor style or lot number changes, accompanied \r\nby increases in prices.\nThe majority of the directors and retailers believed that consumer \r\nspending was on the rise. Most respondents felt that consumer \r\nconfidence had improved as a result of the new economic program, \r\nalthough this reportedly was not much in evidence in upstate New \r\nYork owing to unemployment, prison riots, and other \"depressing \r\nnews.\"\nA number of the directors, particularly those of the Buffalo Branch, \r\nattributed at least part of the improvement in retail sales to a \r\ntemporary bunching of purchases owing to anticipation of price \r\nincreases at the, end of the freeze. One director, the president of \r\na Rochester bank, indicated that retail sales in the city had been \r\nadversely affected by bad weather, and an official of a New York \r\nCity \"quality\" department store felt that unseasonably warm weather \r\nhad slowed down apparel sales, even though his store's sales had \r\nimproved. Three large New York City auto dealers who were contacted \r\nreported that the strength in auto sales that had emerged in \r\nSeptember had continued into October. \"Significant gains\" in auto \r\nsales were also reported to have taken place in the Buffalo area.\nNotwithstanding the improved retail sales picture, most respondents \r\nbelieved that retailers and jobbers were continuing to maintain a \r\ncautious inventory policy. Some exceptions were noted, accounted for \r\nby special circumstances such as the dock strikes and the seasonal \r\nbuild-up of auto dealers inventories. In general, the trend toward \r\nrelying on manufacturers to maintain stocks apparently was being \r\nmaintained.\nMost directors did not feel that the present employment situation \r\nwas \"overly bright,\" but some improvement was reported to have taken \r\nplace in the Rochester and Buffalo areas, and payroll rosters in \r\nwestern New York are expected to expand with an increase in the \r\neconomic pace. On the other hand, the president of a well-known \r\nresearch organization reported that the unemployment picture in the \r\n\"nonprofit\" and teaching fields was \"bad\" and was likely to get \r\nworse.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-10-mi

"Beige Book Report: Minneapolis\nOctober 13, 1971\nWith the exception of a pickup in automobile sales, Ninth District \r\nconsumer spending has not changed noticeably since President Nixon \r\nannounced his new economic program. Directors of this Bank, however, \r\nfeel that retailers in their areas expect good sales in the latter \r\nhalf of the fourth quarter. Results of our latest agriculture credit \r\nconditions survey reveal that farm incomes have improved in recent \r\nmonths, but there is some doubt as to whether these higher income \r\nlevels will be sustained.\nBank directors in general felt that the President's tax proposal \r\nwould have a positive effect on business activity. They were \r\nuncertain, however, as to whether modifying the proposal to grant \r\nmore tax relief to consumers would achieve greater fiscal stimulus. \r\nMost felt that the investment tax credit was necessary, and one \r\ndirector indicated that it would be particularly beneficial in the \r\nlong run.\nSeveral directors reported improved new car sales, and this was \r\nconfirmed in a survey of nine regional automobile sales managers \r\nwhose areas included Minnesota and the Dakotas. New car sales in \r\nAugust and September were up approximately 37 percent from a year \r\nago in South Dakota, North Dakota, and Minnesota, and this sales \r\ngain occurred after the 15th of August. New car sales during the \r\nentire month of August only matched year-ago levels, while in \r\nSeptember they surpassed 1970 sales by around 85 percent. There \r\nseemed to be a majority opinion that the prospect of a repeal in the \r\nautomobile excise tax has stimulated car sales. Two of the nine \r\nsales managers, however, felt its effect had been minimal, while \r\nanother felt the freeze had been more important in stimulating car \r\nsales than the proposed repeal of the excise tax. Also, District \r\nconsumers are reported to have been favorably impressed by the 1972 \r\nmodels.\nBank directors were guardedly optimistic about business activity in \r\nthe fourth quarter. Most reported that retailers in their areas were \r\nlooking forward to a good Christmas season. Many felt that the level \r\nof fourth quarter economic activity would be significantly affected \r\nby the public reaction to Phase II. Local conditions in certain \r\nareas of the District, however, will have more influence than the \r\nPresident's economic program. Areas in Montana and upper Michigan \r\nare still feeling the effects of strikes against two large copper \r\nproducers, although disputes were settled in late September. One \r\ndirector, who looks for a good fourth quarter, attributes it to good \r\ncrop conditions, rather than the President's program.\nThe District's farm income situation seems to have improved further \r\nrecently. Good harvests have swelled farmers' stocks of saleable \r\ncommodities, and the price outlook for the District's fall crop of \r\nfeeder calves from western ranges is generally thought to be \r\nexcellent. According to this Bank's latest agricultural credit \r\nconditions survey, District farm earnings (which include cash \r\nreceipts, the value of stored products, and items in the process of \r\nproduction) have improved noticeably since midsummer. By the end of \r\nSeptember, record wheat harvests had been completed, and even though \r\nlocal prices were down due to the general abundance of wheat and the \r\nWest Coast dock strike, the overall improvement in productivity more \r\nthan compensated for the price losses.\nThe overall picture of District farm income, however, obscures the \r\nproblems of some farmers. In late summer, many of the District's \r\ncornfields in southern Minnesota and eastern South Dakota suffered \r\ncrop damage due to dry weather, a problem which was compounded by \r\nlow corn prices. Hogs, which are important in the same areas of the \r\nDistrict, have also brought low prices. Unfortunately, the current \r\nstrength in farming and ranching has not caused increased business \r\nactivity in the industries supplying agricultural inputs. Farmers \r\nhave again grown cautious in purchasing input items, especially \r\nmachinery and equipment. District bankers indicated that this \r\ncaution was partially responsible for some softness in the demand \r\nfor intermediate-term agricultural credit. Comments received in our \r\nagricultural credit conditions survey revealed that recent declines \r\nin product prices were causing farmers to evaluate their \r\npossibilities for new resource commitments more critically.\nThe survey also indicated that farm earnings for the final quarter \r\nof this year are not expected to be as high as they were in the \r\nthird quarter. Crops yet to be harvested as of October 1 were in \r\npoorer condition because of the dry weather; and the high feeder \r\ncattle prices, which currently indicate high incomes for the \r\nDistrict's ranchers, will subsequently be a profit-squeezing cost to \r\nDistrict cattle feeders. A few survey respondents even speculated \r\nthat District feedlot operators would not be able to bid as much for \r\ninput cattle as operators in other areas, resulting in a decline in \r\nDistrict feeding.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nOctober 13, 1971\nIn the view of our directors, the recent changes in economic policy \r\nhave had a favorable impact on creating a more optimistic outlook \r\nbut without yet producing a major upswing in business activity. \r\nConsumer spending is continuing to rise, with automobile sales \r\nregistering a generally satisfactory increase. Residential housing \r\nand agriculture are providing other sources of strength. The West \r\nCoast dock strike had been causing serious problems for many \r\nproducers, but with the imposition of a Taft-Hartley injunction, \r\nthis problem has been removed for the time being.\nConsumers are maintaining their spending at rates somewhat above \r\nlast year. There are some reports of more numerous purchases of \r\nlarge-ticket items such as television sets and furniture. Some of \r\nthis increased spending is ascribed to anticipation of still higher \r\nprices after the wage-price freeze ends and some to demand \r\nassociated with purchases of new homes. The large chain stores seem \r\nto have had\nabove-average sales in September. Automobile sales also \r\nhave increased. Sales of 1971 automobiles are generally good, and \r\nthe reception of 1972 models is described as favorable. \r\nNevertheless, there is variation among dealers so that overall they \r\nexpect a moderate, rather than strong, increase in sales.\nThe dock strike had been a source of difficulty for many firms, and \r\nits cessation under a Taft-Hartley injunction is a favorable factor. \r\nHowever, agricultural producers in some areas fear that they may \r\nhave suffered a permanent loss of their foreign markets. For most \r\nother firms, the strike represented a temporary, though serious, \r\ndislocation.\nWith the exception of those producers whose disposition of crops was \r\naffected by the dock strike, there are good prospects for District \r\nagriculture. The wheat crop in the Pacific Northwest is described as \r\nconsiderably ahead of last year, and the Idaho potato crop is \r\nexpected to have an above-average yield. Cattle prices are also \r\nfavorable. The Alaska fisheries have had a satisfactory salmon \r\ncatch, and the shrimp harvest was at a record level.\nResidential construction is maintaining a strong pace in most parts \r\nof the District, and this activity is helping the timber industry in \r\nOregon and Washington. The only sign of weakness is in construction \r\nof multi-family units, and several directors report concern about \r\noverbuilding and high vacancy rates for apartments in southern \r\nCalifornia and Arizona.\nDespite these elements of strength, unemployment remains high in \r\nmany areas and businessmen still seem to be cautious in their plans. \r\nThere is no sign of a marked increase in business investment or in \r\nbusiness inventories.\nIn line with this general picture, banks report a slight weakening \r\nin business loan demand. The banks are gaining deposits and looking \r\nto other uses for their funds. Several bankers reported a policy \r\nshift in the direction of emphasizing more consumer lending and \r\nautomobile financing. At some other banks, consumer borrowing is \r\nincreasing without special encouragement. One bank's credit-card \r\noutstandings in September were 28 percent above the previous year's \r\nlevel, and most of this increase is accounted for by larger balances \r\nin existing accounts rather than the addition of new accounts. With \r\nregard to interest rates, there has been a weakening since August in \r\nthe upward pressures on rates and the current tendency is toward \r\nlower rates, but there have been no major moves in this direction as \r\nyet.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"Beige Book Report: Dallas\nOctober 13, 1971\nA substantial upturn in national economic activity in the near term \r\nis generally expected by a sample of business economists in this \r\nregion. These economists, who indicated that economic activity was \r\nimproving moderately in the Southwest before August 15, believe that \r\nPresident Nixon's new program will also bring gains to the states of \r\nTexas, Louisiana, New Mexico, Oklahoma, and Arizona during the \r\nremainder of this year and in the first half of 1972. It is \r\nanticipated that these gains in economic activity will increase \r\nemployment in the District moderately over this period, while the \r\nunemployment rate will fall. The banking directors on the Boards of \r\nthe Head Office and Branches of the Federal Reserve Bank of Dallas \r\nsimilarly believe that local economic conditions will improve. In \r\naddition, they anticipate that loan demand will be moderately \r\nstronger in their respective areas.\nSix of the economists are expecting a substantial upturn in economic \r\nactivity in the nation for the near future. Housing, consumer \r\nspending, and business fixed investment are the sectors which will \r\nbe the major contributing forces to this development. They believe \r\nthat this upturn has already started, or is in the process of \r\nbeginning, and that the improvement will spread throughout the \r\neconomy during the remainder of this year and the first two quarters \r\nof 1972. While the economists are optimistic about economic \r\nactivity, they indicate little hope for a reduction in the rate of \r\ninflation. By a slim majority, some reduction in the rate of \r\ninflation is anticipated for the remainder of this year. However, \r\nduring the first six months of 1972, there is an even split between \r\nthose economists who expect the rate of price increase to fall and \r\nthose who expect it to rise.\nDuring the two months immediately preceding the President's \r\nannouncement of the new program, seven of the ten economists \r\nsurveyed indicated that the pace of economic activity in their \r\nstates was improving. Five of the economists stated that the \r\nunemployment rate in their states was remaining about unchanged, \r\nwhile three observed some decline and two noticed a small rise. In \r\nlight of the President's new policies for economic stabilization and \r\nassuming Congress passes tax legislation similar to that requested \r\nby the President, most expect economic activity in the District to \r\nincrease moderately during the remainder of this year and in the \r\nfirst half of 1972.\nEight of the economists believe that these developments will \r\nmoderately increase employment in the District over the rest of this \r\nyear. However, all anticipate further employment gains during the \r\nfirst six months of next year. The President's plan to reduce \r\nFederal employment by 5 percent is anticipated to have very little \r\nimpact upon employment in this District. Nor do the economists \r\nexpect that the East and Gulf Coast dock strikes will have much of \r\nan impact in the Southwest.\nLittle change in business investment for plant and equipment in this \r\nDistrict is anticipated for the rest of this year. In 1972, most, \r\nhowever, believe that business investment should expand somewhat. \r\nLittle change in Federal Government spending in this District is \r\nanticipated in either this year or the first half of next year. \r\nThere is an even division among the economists on whether or not \r\nthere will be further cuts in defense contracts and military \r\nspending in this District.\nTen of the fourteen banking directors who were surveyed indicated \r\nthat business loan demand has been essentially unchanged in the past \r\nthree months, while five indicated some improvement. A clear \r\nmajority of the banking directors, however, noted moderately \r\nstronger consumer and mortgage loans. On balance, the respondents \r\nindicated a greater willingness to make more business loans in the \r\npast three months, while the sample was evenly divided among those \r\nwho had unchanged or improved their willingness to make consumer \r\nloans. Willingness to make mortgage loans has, however, remained \r\nunchanged during the past three months. Nine of the fourteen \r\nrespondents expected moderately stronger overall loan demand in \r\ntheir areas in the near term, while five believe that essentially no \r\nchange will occur.\nThe current prime rate charged at the banks of these directors \r\nranges from 6 to 8 1/2 percent. However, eight of the bankers are at \r\nthe 6-percent level. Two of the fourteen banks have reduced their \r\ncurrent prime rate recently. Only one of the fourteen directors \r\nanticipates a reduction in the prime rate in the near future. The \r\nrespondents indicated that slightly less than 14 percent of the \r\noutstanding loans were lent at the prime rate, while 18.5 percent of \r\ntheir outstanding loans were closely tied to the prime rate. The \r\ncurrent rate on consumer, real estate, and security loans varies \r\nwidely for the banks surveyed. However, the average in each case is \r\nclose to 8 percent. The average rate paid on passbook savings \r\naccounts is 4.5 percent and that on three-month, small-denomination \r\ncertificates of deposit is 5 percent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"Beige Book Report: Philadelphia\nOctober 13, 1971\nSome of the overall optimism associated with the President's mid-August announcement seems to have dissipated, as Third District \r\nbusinessmen are somewhat less optimistic about the weeks ahead than \r\nthey were a month ago. Bankers are looking for little more than a \r\nseasonal pattern in loan demand. They expect interest rates to \r\nremain stable or possibly edge downward in the coming weeks. \r\nAlthough there was some increase in consumer activity in recent \r\nweeks, retailers and bankers are still cautious in their predictions \r\nabout future strength in the consumer sector.\nDistrict manufacturers seem to be slightly less optimistic than they \r\nwere a month ago. Fewer predict a pickup in the general business \r\nclimate one month ahead than was the case in September. More are \r\nanticipating either unchanged conditions or a decline in business \r\nactivity. There is less optimism with respect to new orders, \r\nshipments, and unfilled orders. Fewer firms plan inventory \r\naccumulations than in September, and a smaller number plan to add \r\nworkers. On the price front, a greater percentage of firms this \r\nmonth are predicting an overall increase in prices than last month.\nArea bankers indicate that loan demand has remained soft, although \r\nthere was spotty activity in the foreign sector, communications, \r\nmachinery, and foods. One banker noted that pickup in activity at \r\nhis bank was due primarily to the aggressive efforts of loan \r\nofficers. In the months ahead, most bankers see more of the same-little more than seasonal patterns. Possible strength may arise in \r\nconstruction and durables. Only one banker predicted a moderate but \r\nsteady increase in loans. Bankers expect interest rates either to \r\nremain stable or drift downward slowly.\nLocal retailers noted a strong consumer pickup in the last three \r\nweeks but were unwilling to translate this into any longer-term \r\ntrend. Most were still cautious about inventory building. Bankers \r\nconfirmed the presence of the yet-reluctant consumer, citing that \r\nconsumer loans were rising very slowly. One banker, who was \r\nparticularly disappointed with the auto loan picture, said that \r\ndealers were caught with large inventories because of unexpected low \r\nsales.\nThe reaction to the preliminary outline of Phase II was mixed. Most \r\nbankers and businessmen want to wait for more details before making \r\nany judgment about its effectiveness. However, one banker indicated \r\nthat he felt the plan would be particularly difficult to implement. \r\nAnother stressed the necessity to crack down hard on violations by \r\nlarge corporations and labor groups. Still another maintained that \r\nwe cannot get trapped into relying on the controls for any type of \r\nlong-run solution.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nOctober 13, 1971\nBusinessmen in the Eighth Federal Reserve District are increasingly \r\noptimistic as to the business outlook. Most of those interviewed \r\nreport that conditions are improving at the moderate rate of recent \r\nmonths. Retail sales in the suburban areas continue to expand, but \r\ncentral city sales have remained unchanged from the relatively low \r\nspring and summer levels. Major gains from a year ago in residential \r\nconstruction continue. Construction-related manufacturing firms, \r\nlikewise, report sales gains and prospects for even larger sales in \r\nearly 1972. Inquiries to industrial development agencies relating to \r\ninvestment opportunities have increased in recent months. Savings \r\nflows through financial institutions have accelerated in recent \r\nweeks. Interest rates on mortgages remain relatively stable, \r\nindicating that\ndemand for savings has, likewise, accelerated.\nOne comment frequently heard in recent discussions with business \r\nleaders is that people are becoming more optimistic. One businessman \r\nsuggested that confidence was the major problem with the economy and \r\nthat the President's program will serve to restore it. Some, whose \r\nbusiness is primarily agriculturally related, have expressed \r\napprehension about the 10-percent surcharge in the President's new \r\neconomic program. They fear foreign retaliation to this increased \r\ntrade restriction. Other reports indicate that some of the \r\nenthusiasm expressed immediately following the wage-price freeze has \r\nmoderated, but these reporters remain mildly optimistic.\nRetail sales have generally continued to expand. Automobile sales \r\nare reported to be either good or excellent. Reports from department \r\nstores in the larger cities indicate that sales have continued \r\nmoderately expansive in the newer outlying stores but that little \r\nchange was noted in the older inner city stores. Those firms which \r\nare located entirely in the older sections of the city often report \r\nno recovery since the beginning of the year. Over the last few \r\nyears, several retail stores have closed in downtown St. Louis, \r\nincluding one of the three largest department stores. Also, a major \r\ndepartment store in downtown Louisville recently announced the \r\nintention of closing.\nResidential construction has continued strongly upward. Since \r\nJanuary 1, the number of one-family units built in the St. Louis \r\narea is 50 percent greater than in the same period last year. Multi-family units constructed and mobile homes sold are, likewise, up but \r\nat a somewhat slower rate than\nsingle-family homes. Reports given at \r\ndirectors' meetings in the three branch cities indicate a similarly \r\nstrong residential construction trend throughout the District.\nInterest in investment opportunities by Eighth District businessmen \r\nis apparently reviving. A St. Louis industrial development agency \r\nreported that the number of inquiries by both national and local \r\nfirms concerning plant locations has increased in recent months. \r\nReports from Louisville, likewise, indicate that more potential new \r\nplant sites are being studied than during the past two years.\nSavings flows into financial agencies have remained at the high \r\nrates of a month ago, following the midsummer dip. One of the larger \r\nSt. Louis savings and loan associations reported that both gross and \r\nnet savings in September were the largest on record. Interest rates \r\non mortgages are relatively stable in the St. Louis area, but some \r\nsavings are being channeled to other areas of the country where \r\ndemand is rising more rapidly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"Beige Book Report: Cleveland\nOctober 13, 1971\nBusiness conditions in the District are showing some signs of \r\npickup, particularly in the depressed manufacturing sector. It seems \r\nlikely that September may prove to be the low point in the recent \r\nsluggish phase of manufacturing activity, as well as the high point \r\nfor unemployment. Although depressing effects from steel inventory \r\nliquidation are in large part over, near-term improvement in \r\nproduction is expected to be moderate.\nOur latest survey of District manufacturers showed an increase in \r\nnew orders in September, following weaknesses during the previous \r\nthree months. Firms' anticipations for October call for further \r\nincreases in new orders and shipments, a leveling in backlogs, which \r\nhave been declining for some time, and a continued reduction in \r\ninventories. Although employment is expected to remain sluggish in \r\nOctober, firms anticipate an increase in the workweek.\nThe District's insured unemployment rate rose 0.5 percent in \r\nSeptember, following an 0.4-percent increase in August. Unemployment \r\nbegan to decline toward the end of September; and it is likely that \r\nlast month will have been the cyclical peak for the District's \r\ninsured unemployment rate. Some metropolitan areas that are heavily \r\ndependent on the steel industry have recently suffered sharp \r\nincreases in unemployment. From mid-July to mid-September, the \r\ninsured unemployment rate went from 3.0 percent to 13.8 percent in \r\nYoungstown-Warren, from 4.1 percent to 9.6 percent in Canton, and \r\nfrom 4.3 percent to 6.7 percent in Pittsburgh. There were still \r\nscattered reports of layoffs in the steel industry in October.\nEconomists from the major steel companies in the District all \r\nreported an improvement in new orders in September, although two \r\nemphasized that their orders were well below normal. Steel orders \r\nfrom the auto industry have been running at about 20 percent of \r\ntheir consumption rate in October, compared with 50 percent during \r\nthe 1968 inventory liquidation period. Auto firms are expected to be \r\ntaking normal deliveries of steel by December, however. The \r\neconomists estimated that steel inventories would be back to the \r\nprestrike hedge level sometime in November, but they also expect \r\nsteel consumers to reduce inventories further in December. The \r\neconomists asserted that inventory liquidation will definitely be \r\nover by year-end. The three steel industry economists agreed that \r\nsteel ingot production, on a seasonally adjusted basis, would \r\nincrease slightly less than 5 percent from the third quarter to the \r\nfourth quarter.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nOctober 13, 1971\nJudging from the District reports, the effect of the new economic \r\nprogram thus far has been to improve the economic outlook. Spending \r\nand production, as yet apparently largely unaffected by the new \r\nprogram, continue a moderate expansion. Strength in consumer \r\nspending is expected to continue. There is no sign of a marked \r\nchange in capital spending plans. The loan demand outlook is mixed. \r\nThere are some expectations of interest rate declines.\nSeveral banks report that optimism generated by the announcement of \r\nthe new economic program continues. However, the St. Louis Bank \r\nindicates that the original enthusiasm for the program has \r\nmoderated, and the Philadelphia Bank reports that earlier optimism \r\nseems to have dissipated. Kansas City reports that some merchants \r\nthink the program may be adversely affecting consumer spending. \r\nChicago reports that the program may have resulted in an \"air of \r\nuncertainty\" that conceivably could delay the economic recovery.\nThe Philadelphia and Chicago Banks report skepticism about the \r\nefficacy of Phase II, and one of Boston's academic respondents \r\nthinks the control structure is awkward. Chicago indicates that some \r\nsmall firms appear to believe they can evade the controls with \r\nimpunity and that large firms have almost cut off publicity on price \r\ndevelopments.\nThere is some doubt about the effect of the program on prices and \r\nprice expectations. The Chicago Bank reports the freeze may have \r\naided the disposal of 1971 model automobiles at better-than-expected \r\nprices and that popular 1972 models are being loaded with high-profit extras. Philadelphia reports a rise this month in the \r\npercentage of manufacturers predicting an overall increase in \r\nprices. Dallas reports that economists interviewed indicate little \r\nhope for a reduction in the rate of inflation. A Boston director \r\ndoes not feel that the size of a recent wage settlement was affected \r\nby the freeze, except that the freeze delayed the negotiated wage \r\nincrease. The New York Bank reports excellent compliance with the \r\nfreeze, yet one of the Bank's directors warns of a \"head of steam\" \r\nbuilding under wage demands.\nRetail sales were most often described as strong or improving. \r\nRobust auto sales were commonly cited. Two banks report a bunching \r\nof purchases to beat post-freeze price increases. Two banks also \r\nmention that furniture sales are improving; in one case, the \r\nimprovement was associated with the surge in residential \r\nconstruction.\nSeveral banks mention that no early uptrend in capital spending is \r\nanticipated and that inventory plans remain cautious. However, an \r\nincrease in plant location inquiries is detected by St. Louis. Also, \r\nChicago reports an increase in design-stage activity for some types \r\nof long-lead time machinery. Capital goods producers in the Boston \r\nDistrict report improved prospects. An academic respondent in the \r\nBoston District sees a danger that political pressure to lower \r\nshort-term interest rates could result in a flood of liquidity that, \r\nin conjunction with liberalized depreciation and the investment tax \r\ncredit, could trigger an excessive capital spending boom in the \r\nfirst quarter of 1973.\nManufacturers in the Richmond District report further increases in \r\nshipments, orders, and backlogs. Cleveland also mentioned an \r\nincrease in new orders and reported that steel companies experienced \r\nan improvement in new orders in September, although orders were well \r\nbelow normal. Steel inventory liquidation is expected to continue \r\ninto December. Philadelphia reports that manufacturers are less \r\noptimistic with respect to new orders, shipments, and unfilled \r\norders.\nLoan behavior and loan demand outlook are mixed. Several banks note \r\nmoderate to strong demand for consumer and mortgage loans. On the \r\nother hand, three banks report expectations of weak loan demand \r\naccompanied by declines in interest rates.\nStrength in construction was reported by several Districts, but San \r\nFrancisco indicated concern over rising vacancy rates in multi-\r\nfamily units and Chicago indicates an excess supply of space in new \r\noffice buildings. An oversupply of office space and apartments may \r\nalso slow the growth of construction in the Atlanta area.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nOctober 13, 1971\nAlthough retail sales were relatively slow in many parts of the \r\nTenth District in August and September, most major retailers are \r\nanticipating a better performance for the rest of the year. A number \r\nof firms will be increasing inventories because of their optimistic \r\nsales outlook. Few retailers attribute their optimism to the new \r\neconomic programs. Automobile sales and residential construction \r\nhave remained generally strong across the District, despite some \r\nweakness in other\nlarge-ticket items. Demand deposits have declined \r\nrecently at Tenth District banks, and business loan demand remains \r\nsluggish. Some bankers feel that the new economic programs have \r\nadversely affected consumer attitudes and consumer loan demand.\nMajor department stores were surveyed in Kansas City, Wichita, \r\nDenver, Omaha, and Oklahoma City\u2014some of which were able to supply \r\ninformation about a wider geographic area. Retail sales in Denver \r\nshowed a mixed picture, with reports varying from reluctance to make \r\ncommitments for large appliances to software sales remaining strong. \r\nThe general feeling among Denver merchants is that, so far, the new \r\neconomic program has had little impact on retail sales. Several \r\nmerchants reported that some major purchases were being postponed \r\nbecause of uncertainty and the pay freeze.\nOmaha stores reported considerable gains in sales this year over \r\nlast year but very little gain in August and September. They felt \r\nthat there would be good sales the rest of the year for big-ticket \r\nitems, with the advantage going to automobiles to the possible \r\nimpairment of softgoods sales. On the whole, they expected only a \r\nmoderate increase in sales this Christmas season. In the Oklahoma \r\nCity area, a downtown store reported a moderate sales increase this \r\nyear, while a major suburban store reported a larger increase. Both \r\nwere somewhat optimistic about the rest of the year, but neither \r\ncredited the expected improvement to the new economic programs.\nDepartment stores in Kansas City reported sales this year as being \r\ngenerally better than last year; however, there was considerable \r\nvariability. Most retailers reported sales for the year as being \r\ngood. However, some reported sales in August and September as being \r\nunusually strong, while others reported sales in these months as \r\nbeing much slower than earlier this year. The stores reporting \r\nunusually strong sales attributed the strength to factors other than \r\nthe new economic program. Merchants in Kansas City generally are \r\noptimistic about the rest of the year and have purchased inventories \r\nin anticipation of a slight increase in sales over last year's very \r\ngood December performance.\nThere is considerable variation across the District in other parts \r\nof the economy both by industrial sector and geographic area. \r\nAutomobile sales are strong but, in many parts of the District, are \r\nnot reflecting the strength shown nationally. Residential \r\nconstruction appears to be booming nearly everywhere except in \r\nWichita, where housing activity is slow. Wichita is still an area of \r\nsubstantial unemployment (more than 9 percent), and it may be noted \r\nthat retail sales there present a mixed picture. However, August was \r\na good month for shipments of general aviation aircraft from \r\nWichita, and continued employment gains in the aircraft and parts \r\nindustry are expected in the near future.\nDemand deposits have declined noticeably at Tenth District banks in \r\nrecent weeks, a period in which rather sharp gains typically occur. \r\nSome of the decline is accounted for by correspondent balances, but \r\nIPC deposits have dropped also. Bankers interviewed fail to detect \r\nany tendency for this weakness to be concentrated in either business \r\nor personal accounts. Some indicated that local business accounts \r\nare holding up better than their national accounts. The weakness in \r\nconsumer-type time and savings deposits noted in the past two \r\nreports has not continued, as these accounts have expanded rather \r\nsharply in recent weeks. Growth in large CD's continues but at a \r\nslower pace than in July and August.\nBusiness loan demand remains quite sluggish at District banks. \r\nResidential mortgage and construction loans and, to some extent, \r\nconsumer installment loans remain the areas of strength in the Tenth \r\nDistrict. Bankers contacted still have detected no impact on \r\nconsumer loan demand from the new economic program. Indeed, some \r\nprofess to detect an adverse note. It is stated that consumers are \r\nimpressed by the fact that their incomes are frozen but have some \r\ndoubts about the effectiveness of the freeze on prices. This \r\nattitude, some bankers felt, appears to be solidifying existing \r\nconsumer caution.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-10-ri

"Beige Book Report: Richmond\nOctober 13, 1971\nJudging from the response of businessmen and bankers, a moderate \r\nuptrend of business activity continues in the Fifth District. \r\nManufacturers report further increases in shipments, new orders, and \r\nbacklogs of orders. Furniture orders and shipments in particular \r\nhave made substantial gains in the past 60 days. Growing strength is \r\nreported in retail trade, with automobile sales especially strong. \r\nAlthough businessmen apparently remain quite optimistic about the \r\nimpact of the President's new economic program on the economy, 20 of \r\n23 manufacturing respondents reported no recent changes in capital \r\nspending plans or inventory policy. The coal strike is affecting \r\nsome areas of the District economy adversely.\nBoth durable and nondurable manufacturers continue to experience \r\nincreases in shipments, new orders, and backlogs of orders. Strength \r\nis especially evident in firms providing construction-related items, \r\nsuch as bricks, tile, and plumbing supplies, with delivery schedules \r\nrunning up to three months behind in some cases. Concern was \r\nexpressed over the already dampening effect of the coal strike on \r\neconomic activity in parts of West Virginia and the potential impact \r\nof a lengthy strike.\nFurniture manufacturers participating in our regular survey, as well \r\nas others contacted in a special telephone survey, were very \r\noptimistic about the outlook for the economy in general and the \r\nfurniture industry in particular. Shipments and orders were \r\nreportedly much stronger in August and September than in the \r\nprevious 60 to 90 days. Looking ahead, the respondents believe that \r\nthe prospects for the furniture industry are better than they have \r\nbeen in the last two years. This fall, the industry plans to launch \r\na nationwide advertising campaign which they believe will have a \r\nfavorable impact on sales. It is not anticipated that the wage-price \r\nguidelines will present any unusual difficulties for the furniture \r\nindustry.\nResponses indicate that the retail trade sector is experiencing \r\ngrowing strength. Automobile sales appear to be especially strong, \r\nwith more than two-thirds of banking respondents reporting an \r\nincrease in auto sales in their areas. General optimism about near-term retail sales prospects was apparently tempered by high rates of \r\nunemployment in some local areas.\nInventories in manufacturing reportedly have declined and, as a \r\nresult, they are now more in line with desired levels. Trade \r\nrespondents, however, indicated that their inventories were up over \r\nthe previous reporting period. The employment picture in the \r\nDistrict has apparently changed very little in the last month. On \r\nthe price front, four manufacturing respondents and one trade \r\nrespondent indicated that prices received were down since the last \r\nsurvey. No respondents reported price increases.\nResidential and nonresidential construction advanced further in the \r\nlast month. More than 50 percent of banking respondents reported \r\nincreases in construction in their areas. Bankers also report that \r\nloan demand remains strong, with consumer loans showing the most \r\nstrength.\nDamage to the corn and peanut crops from Hurricane Ginger was heavy \r\nin east central North Carolina. District cash receipts from farm \r\nmarketings during January-July were 4 percent below those in the \r\nsame period last year. The 1971 marketing season on border belt \r\nflue-cured tobacco markets set an all-time high, general average \r\nprice.\nIn response to a special question concerning recent changes in \r\ncapital spending plans and inventory policy, 20 of 23 manufacturing \r\nrespondents reported no change in either capital spending plans or \r\ninventory policy. Two respondents indicated that capital spending \r\nplans had been increased, and another indicated that long-term \r\ncapital plans are being reevaluated in light of the investment tax \r\ncredit proposal. Most banking respondents believe that near-term \r\nbusiness activity will either stabilize at present levels or \r\nincrease. Only two respondents thought that business activity may \r\ndecline.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-10-at

"Beige Book Report: Atlanta\nOctober 13, 1971\nReports indicate a slight strengthening in the area's economy but, \r\nas one Alabama director put it, \"On the whole, business confidence \r\ncontinues to hang in an uncertain area between pessimism and \r\noptimism, inclining toward the latter.\" The near-term outlook is \r\nviewed with cautious optimism, but there is some doubt about the \r\nability to cope with major economic problems over the longer run. \r\nThe employment outlook is mixed. Construction activity continues \r\nstrong, but the rate of growth is expected to slow. Retail sales are \r\nstrong.\nIn many areas, manufacturing activity and employment are reported \r\nsteady, but there are some weaknesses. For example, a metal company \r\nin northwest Alabama has cut production by nearly 10 percent. In the \r\nPalm Beach area, 1,200 workers have been laid off as a result of \r\nRCA's decision to withdraw from the computer field. The spreading \r\neffects of the longshoremen's strike are being compounded by a \r\nstrike affecting 6,100 workers at a Mississippi Coast shipyard. A \r\ntextile company has closed three old plants in Georgia, resulting in \r\nthe laying off of several hundred workers. However, another textile \r\nplant has reopened and hired 250 workers. Lockheed-Georgia has \r\nrecalled 2,400 hourly employees that had been laid off for three \r\nweeks because of a strike at a wing manufacturer in Nashville.\nAlthough the airline industry continues to encounter a rough year, a \r\nmajor airline company headquartered in Miami is avoiding layoffs. \r\nVarious other devices are being used, including a reduction in \r\nemployees through attrition. Additionally, employees are being \r\nencouraged to take leaves of absence without pay but with the \r\nprivilege of guaranteed reservations on company planes. Other \r\nworkers are rescheduling vacations for slack seasons, and surplus \r\nemployees are being shifted within the company. Pilots are \r\nreportedly cooperating by agreeing to work extra hours at straight \r\npay rather than at overtime rates.\nDisney World unofficially opened on October 1. Crowds have averaged \r\nabout 11,000 per day. Disney officials are reported to be pleased \r\nwith the reception by visitors and, especially, with the smoothness \r\nof traffic flows and overall operation. A massive influx of visitors \r\nis anticipated after the official opening later this month. \r\nConstruction in the vicinity of Disney World remains strong. \r\nReportedly, the Disney site on the Atlantic Coast will not be \r\ndeveloped in the near future.\nConstruction activity continues to buoy the region's economy. A 200-acre research and industrial park is being located northeast of \r\nAtlanta, and a $350-million generating plant will be built southwest \r\nof Atlanta. A motor inn and convention hall have been announced for \r\nVicksburg. A combination apartment, commercial, and office complex \r\nis planned for Baton Rouge. A project of major proportions is \r\nreportedly under consideration for the West Palm Beach area. A large \r\nparcel of land in the Florida Panhandle has been purchased for \r\nresidential development. New construction is reportedly increasing \r\n\"dramatically\" in the Jacksonville area. However, a Federal court \r\norder has halted the start of construction on the huge Tennessee-Tombigbee Waterway in Alabama. This project is receiving increasing \r\nopposition from conservationists.\nRetail sales are generally reported strong, with auto sales leading \r\nthe way. Large shopping malls have recently been opened in Atlanta \r\nand Pensacola.\nBountiful crops are being harvested throughout much of the District. \r\nThe Georgia tobacco market closed with record receipts. The cotton \r\ncrop is in good condition. The rice harvest in Louisiana was large, \r\nbut shipment is now hampered by the dock strike. It is estimated \r\nthat the sugar cane crop in Louisiana has been reduced by 11 to 15 \r\npercent by Hurricane Edith. There is considerable weakness reported \r\nin grain prices. High consumption of frozen orange juice has reduced \r\nthe carry-over inventory to low levels. This should assure firm or \r\nrising prices in 1972. There is growing concern over massive fish \r\nkills in Escambia Bay and Santa Rosa Sound in northwest Florida. \r\nThere have been 16 major kills this year, the worst one commencing \r\non September 4 and still continuing. The kills are blamed on low \r\noxygen content in the water caused by poor water quality.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-10-ch

"Beige Book Report: Chicago\nOctober 13, 1971\nPublic responses in this District to last week's Phase II \r\nannouncements were similar to those noted following the NEP speech \r\nin August. Executives of large businesses and financial institutions \r\nlauded the proposals and pledged cooperation. Some prominent \r\nacademicians, especially of the \"Chicago School,\" were sharply \r\ncritical. Union leaders condemned any program that did not control \r\nprofits and interest rates.\nA number of spokesmen criticize the \"vagueness\" of the Phase II \r\nproposals and question the efficacy of controls administered by \r\npart-time boards without elaborate enforcement machinery. Some small \r\nfirms appear to believe they can evade the controls with impunity. \r\nLarge firms have almost cut off publicity on price developments and \r\nother matters that may come under the perusal of controllers. \r\nCompliance by large firms, moreover, may be more apparent than real. \r\nReports from Detroit indicate that the freeze has aided the disposal \r\nof 1971 models at better-than-expected prices and that popular new \r\nmodels are being \"loaded\" with high-profit margin \"extras.\" Some \r\ndirect opposition is also apparent. The head of the U.A.W. announced \r\n(October 8) that he would refuse to serve on the Pay Board, and he \r\ncomplained of \"conflicting interpretations\" by Administration \r\nspokesmen.\nThere is some evidence that business decisions are being delayed, \r\npending fuller understanding of the control program. Lifting of the \r\nabsolute freeze in November will be the signal for attempts to \r\nactivate dormant decisions to increase wages, prices, and dividends. \r\nAn air of uncertainty exists that conceivably could delay the \r\neconomic recovery. Although not voiced publicly, there is widespread \r\ndistrust of direct controls by businessmen and lenders-based in some \r\ncases on recollections of the workings of such controls during and \r\nafter World War II.\nRetail sales in this District apparently were strong in September, \r\nespecially autos and household durables. Orders for producer \r\nequipment remain at a low level, but there has been a rise in \r\ndesign-stage activity for some types of long-lead time machinery. An \r\nimportant producer of diesel engines is expanding capacity to \r\nprovide for an expected upsurge in demand some time in 1972 to avoid \r\nallocations required in the late 1960's.\nSome evidence points to a rise in the demand for workers, especially \r\nthose with special skills. But layoffs are still about offsetting \r\nhirings. Overall employment in this District has changed little in \r\nrecent months, after allowance for seasonal variation. Various \r\nmunicipalities have been forced to curtail programs, including \r\neducation, because of financial stringencies. Among the domestic \r\nchanges in the employment picture in the past two years has been the \r\nshift in the supply of teachers from shortages to substantial \r\nsurpluses.\nUnemployment rates in the District are generally below the national \r\naverage, except for auto industry areas and some centers producing \r\nsteel and producer equipment. Estimates of both employment and \r\nunemployment, however, have been below those of last year in recent \r\nreports on local labor markets, indicating labor force withdrawals. \r\nUnused labor resources in these areas probably are not adequately \r\nrepresented by unemployment estimates.\nThe residential construction picture remains vigorous here, \r\nespecially in the Chicago area. Financing, including construction \r\nloans, is readily available. The market for luxury-type apartments \r\nhas weakened, but important new projects are being announced. \r\nMeanwhile, space in new office buildings in downtown Chicago, \r\ncompleted or nearing completion, is in excess supply. Prospects for \r\nnew commercial projects are poor throughout the District. Starts on \r\nmanufacturing buildings are at an extremely low level with no \r\nprospect for early improvement. Important municipal projects are \r\nbeing postponed for lack of funds, but some Federal projects have \r\nbeen activated.\nSales of life insurance policies have strengthened substantially in \r\nrecent months, possibly reflecting an upgrading of the sales force. \r\nDisbursements on life insurance policy loans have increased \r\nmoderately, following a sharp decline earlier in the year. Life \r\ninsurance companies continue to be cautious in making new investment \r\ncommitments.\nDistrict banks are avoiding investments in long-term municipals. \r\nBusiness loan demand is still relatively weak. Partly for this \r\nreason, banks are not seeking CD money aggressively, despite a \r\nslower inflow of savings in recent months.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-10-bo

"Beige Book Report: Boston\nOctober 13, 1971\nAccording to our directors, the consumer sector continued to \r\nstrengthen during September, but business capital spending has not \r\ngenerally improved. None of the directors reported any declines in \r\ntheir own prices or in the prices of their suppliers.\nThe consumer goods industries continued to show gains in September, \r\nbut this was in line with increases experienced this summer. No \r\nsudden surge in buying was noted. Dealers in recreational equipment, \r\nsuch as snowmobiles, boats, and camping equipment are very \r\noptimistic and are placing large orders to manufacturers. One \r\ncamping equipment manufacturer still is planning double shifts in \r\nOctober to meet demands\u2014a very unusual situation in this seasonal \r\nbusiness.\nConsumer loans are reported by a bank director as still doing very \r\nwell, with home improvement loans growing especially rapidly. The \r\ndemand for mortgage loans is also still very high.\nCapital goods producers noted an improvement in the atmosphere but \r\nnot in their orders, which have shown only a gradual improvement. \r\nThis is especially true for the machine tool manufacturers. A large \r\nDistrict machine toolmaker stated that they did not expect an \r\nimprovement in their orders until the second quarter of 1972. An \r\nexception to the general picture was a spurt in orders for twin-engine commercial aircraft. Orders for oil field drilling equipment \r\nare also continuing to do quite well.\nOnly one director was involved in wage negotiations during the \r\nfreeze period. He did not feel that the settlement negotiated had \r\nbeen affected by the freeze, although, of course, the negotiated \r\nwage increases would not be paid until after the freeze.\nThree of our academic respondents were available for comment this \r\nmonth. Although Professors Tobin, Eckstein, and Shapiro agreed that \r\nthere is a good chance of moderating the rate of inflation to the 3-percent upper limit of the Administration's goal range, the \r\nannouncement of Phase II was criticized by each, though for \r\ndifferent reasons. Tobin thought that 3 percent is a modest goal in \r\nlight of his belief that inflation had been tapering off slowly \r\nanyhow. Eckstein felt that the control structure is awkward\u2014with the \r\nCost-of-Living Council having the bulk of the power and the Price \r\nand Pay Boards having most of the responsibility. Noting that the \r\nhighly visible major sectors have lagged behind in recent years, he \r\nobjected to the fact that notification was required only in the \r\nmajor sectors and voluntary compliance relied upon heavily \r\nelsewhere. He questioned the absence of a specific program for the \r\nmedical services and transportation sectors and the presence of an \r\ninterest committee, on the grounds that interest controls could be \r\naccomplished through open market operations.\nShapiro's objections centered on the failure to mention the demand \r\nstabilizing measures which would be necessary to make the program \r\nwork. In particular, he saw a danger that the political need to \r\nlower short-term interest rates would bring a flood of liquidity \r\nwhich, in conjunction with a strong takeoff in consumer spending and \r\nthe investment stimulus of liberalized depreciation and the \r\ninvestment tax credit, could trigger an excessive capital boom in \r\nthe first part of 1973. He cited the historical analogy of the \r\nexpansionary monetary policy of 1954, which led to excessive capital \r\nspending in 1955 and 1956. A 6-percent rate of growth in the money \r\nsupply, he felt, would be sufficiently moderate to avert this \r\ndanger. Tobin also reasoned by historical analogy, though his \r\nargument underlined the danger of excessive monetary restraint. He \r\ncited the 1968 experience of excessive reliance upon the potency of \r\nfiscal restraint. The danger in the present instance is that of \r\nplacing too much reliance on the fiscal stimulus of responding to \r\nthe urgings that the rate of monetary growth be curtailed. Tobin \r\nfeels that tax reductions for individuals offer a more certain \r\nfiscal stimulus than corporate reductions, at least when a rapid \r\nstimulus is needed.\nTobin also offered a theoretical argument for an expansionary \r\npolicy. Without offering an estimate of the relative size of each \r\ncomponent, Tobin noted that the current high levels of nominal \r\ninterest rates contain both real and inflationary anticipations \r\ncomponents. If the anticipatory component is large and if the anti-inflationary controls are successful in reducing inflation, the \r\nFederal Reserve should accommodate the ensuing fall in rates\u2014to attempt to maintain nominal rates at their previous level would be a \r\npolicy of raising real rates. If, on the other hand, the \r\nanticipatory component is small, then real rates of interest are \r\ncurrently high and would need to be lowered to bring about a sizable \r\nexpansion of the economy.\nNeither Eckstein nor Shapiro was distressed over the current \r\ninternational trade situation. Shapiro recalled the erroneous dire \r\npredictions by \"officialdom\" and private financial analysis that a \r\nfinancial crisis would ensue if gold were \"embargoed.\" Shapiro would \r\nbe content to let the dollar float, eliminate the import surcharge, \r\nand allow foreign countries to acquire dollars, if they wished, \r\nwhile the United States acquired real goods and services. Eckstein \r\nfelt that the high, short-run price elasticity of traded goods would \r\nrestore a trade surplus of nearly $4 billion early in 1972, although \r\nthis amount would not constitute a solution to the problem.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"Beige Book Report: Philadelphia\nSeptember 15, 1971\nThe increase in optimism about the economic outlook in general that \r\nfollowed President Nixon's speech in mid-August has had little \r\neffect on the specific plans of individual firms in the Third \r\nDistrict. Most are still taking a wait-and-see attitude about how \r\nthe new economic policies will affect their own firms. Area bankers \r\nare generally hopeful of a further pickup in loan demand on a wide \r\nfront. Several of them also look for higher interest rates near the \r\nend of the year and into 1972.\nHost businessmen in the Third District are hopefully optimistic \r\nabout the economy. Before the President's speech, the prevailing \r\nview was that business was recovering from last year s recession but \r\nthat inflation would remain a serious problem because of rising \r\nlabor costs. The President's new economic policies have been greeted \r\nfavorably, and did increase the general level of optimism about the \r\neconomic outlook. However, it is difficult to detect much of a \r\nchange in the outlook businesses now have for their own firms.\nFor example, in terms of such key indicators as new orders, \r\nshipments, and unfilled orders, District manufacturers are no more \r\noptimistic now than they were a month ago. As for capital \r\nexpenditures, there seems to be a slight boost in outlay plans, but \r\nmost manufacturers want to wait until the incentives for new plant \r\nand equipment are more certain and projected sales actually \r\nmaterialize. There is no noticeable increase in hiring plans since \r\nearly August. On the price front, area manufacturers are a little \r\nless pessimistic than before the President's speech.\nLoan demand at Philadelphia banks has shown some pickup in recent \r\nweeks, but the increase has been modest for most banks. Most of the \r\nincrease in loan demand reflects rising business demand for credit. \r\nConsumer borrowing is flat at all but one large bank, and in that \r\none only up slightly. Only one of the banks we contacted was willing \r\nto attribute much of the increased loan demand to foreign sources, \r\nalthough weekly reporting statistics indicate a strong \r\ncounterseasonal upsurge in the foreign loan picture.\nLooking ahead, local bankers are generally hopeful of a further \r\npickup in loan demand. One banker looked to inventory building as a \r\nsource of loan demand. Another said that an expanding economy in \r\ngeneral would lead to more loan demand. Another thought construction \r\nmight provide additional stimulus.\nAs for interest rates, the consensus among bankers is that the \r\nFederal funds rate is out of line with other short-term rates and \r\nwill likely drop in the near future. Looking toward the end of the \r\nyear, however, several bankers thought rates would start climbing. \r\nOne banker said as the economy picks up steam, \"rates are bound to \r\nrise\". Another thought the inflation premium would probably increase \r\nafter the freeze on wages and prices. Still another indicated that \r\nthe cost of money for banks would likely go up and this would in \r\nturn push up bank rates.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-09-ch

"Beige Book Report: Chicago\nSeptember 15, 1971\nObservers in this District are in general agreement that 1972 will \r\nsee a substantial 5 to 6 percent rise in real output, with some \r\nabatement of the rate of price inflation. These views have been \r\nstrengthened by the President's program. All evidence available to \r\nus indicates that business firms, labor unions, and state and local \r\ngovernments are cooperating with the \"letter and spirit\" of the \r\nwage-price freeze. Limited information provided by retailers \r\nindicates that sales picked up after mid-August. New hirings have \r\nnot accelerated, but layoffs are less frequent than was the case \r\nlast spring.\nMany employees have been promised increases in compensation to be \r\neffective as soon as the control is removed. Moreover, there is \r\nstrong dissatisfaction with the price freeze on the part of \r\nmanufacturers that had planned price increases, after having \r\npreviously granted wage increases.\nThe proposed reenactment of the investment tax credit is very \r\npopular with both producers and purchasers of capital goods. There \r\nwas no immediate, discernible impact, however, on orders for new \r\nequipment. Large firms that always have a \"shelf\" of investment \r\nprojects are reexamining marginal situations. But there is concern \r\nthat the Congress will cancel the Treasury's liberalized \r\ndepreciation rules, which are believed to be about as important as \r\nthe investment tax credit as a stimulus to capital outlays.\nThe import surcharge, and devaluation of the dollar, may deter \r\nimports of finished capital goods. However, some foreign components \r\n(such as ball bearings from Japan) have been selling at prices 30 to \r\n40 percent below prices of domestic counterparts. The deterrent to \r\nauto imports will be minimized because the two principal domestic \r\nsubcompacts are now being produced at capacity. Imports from the \r\nOrient now hold virtually the entire domestic market for smaller \r\nconsumer electronic products, including TV sets with screens under \r\n16 inches. These markets are not expected to be recaptured, but \r\ninroads in other product lines may be slowed. Imports of small \r\nwashers and refrigerators, which have become significant this year, \r\nface no domestic competition at present.\nEmployers hope that a guideline framework will help hold down \r\nincreases in worker compensation in post-freeze negotiations, from \r\nthe recent standard of 10 percent or more annually, to perhaps 6 \r\npercent. The continuing ample supply of people seeking work will \r\ntend to aid such negotiations.\nOne result of the wage-price freeze has been a near blackout on \r\npublicity on price developments\u2014up or down. Some businesses suggest \r\nthat price discounting will be restricted to compensate for \r\ninability to raise prices of other products.\nSales of domestically produced major appliances are running about 5 \r\npercent above last year with the margin of gain widening. Purchases \r\nof these items appear to be related to the rising number of house \r\ncompletions. Demand for furniture has been excellent in recent \r\nmonths.\nSteel producers are experiencing a somewhat more rapid pickup in \r\norders than had been expected a month ago. Auto firms now expect to \r\nbe ordering steel on a normal basis in November, rather than in \r\nearly 1972. Inventories of steel are \"unbalanced\" in some cases. \r\nAbout two thirds of the\nstrike-hedge steel inventory is expected to \r\nbe used up by the end of September.\nResidential construction continues to boom, with the Chicago area \r\nespecially strong. Mobile home output is at capacity. Existing homes \r\nare selling readily. Contracts for new commercial and industrial \r\nstructures, however, are down sharply with no revival in sight. \r\nPublic construction activity is rising. Work has started again on a \r\nlarge Federal office building in Chicago. Foundations of this \r\nbuilding were completed in 1968.\nInflows of savings to commercial banks continue at a reduced level. \r\nChecks with large District banks show no significant pickup in \r\nbusiness loan demand following the rise in commitments noted in \r\nrecent months.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-09-at

"Beige Book Report: Atlanta\nSeptember 15, 1971\nThere has been a favorable reaction among businessmen and bankers in \r\nthe District to the President's program, and it is hoped that some \r\nsort of controls will be continued at the end of the freeze. There \r\nappears to be an anticipation of increased consumer confidence that \r\nwill eventually increase consumer spending, but there is skepticism \r\nabout the overall effectiveness of wage and price controls in Phase \r\nTwo unless wage increases can be effectively controlled. Agriculture \r\nand tourism are bright spots in the region's economic outlook. \r\nConstruction is showing evidence of strength in some areas and \r\noverbuilding in others.\nResidential construction continues to pace the economic recovery in \r\nthe Southeast. Activity is particularly strong in much of Florida. \r\nLarge condominium projects have been announced for the Jacksonville \r\nand Ocala areas. A retirement community and a city for 7,000 have \r\nbeen announced for central Florida. A large condominium is also \r\nbeing constructed in the Nashville area.\nNonresidential construction is highlighted by the start-up of work \r\non the Louisiana domed stadium. This project, it is hoped, will \r\nrevitalize the New Orleans economy. Two bridges are to be built \r\nalong the Gulf Coast in north Florida. Plans for two nuclear \r\ngenerating plants have been announced. One is to be built in \r\nTennessee and the other in Georgia. A new convention center is \r\nplanned for the Orlando area. Ground will be broken in the fall on a \r\n$100 million office park and distribution center located in the \r\nMiami area. However, there is also evidence of overexpansion, at \r\nleast in the Atlanta area. It has been reported that nearly 25 \r\npercent of the space in Atlanta office parks is vacant and that \r\ntotal available space is expected to increase by more than one third \r\nby next summer. The market for apartments and warehouses in the \r\nAtlanta area has also been saturated. The vacancy rate for \r\napartments and unused warehouse space is rising rapidly. With \r\nconstruction still under way, it may take several years for demand \r\nto catch up with supply.\nThe agriculture outlook is very promising. Tobacco farmers are \r\nbenefiting from large crops and firm prices. Cotton, corn, soybean, \r\npeanut, and sugar cane crops are all expected to be good to \r\nexcellent. The movement of frozen orange concentrate is holding up \r\nextremely well.\nThe recreation and tourist industries are enjoying prosperous \r\nconditions and prospects are good. Disney World will open on October \r\n1, and the estimated first-year attendance has been increased to 11 \r\nmillion. Employment at this project will total about 6,500. \r\nMoreover, land prices around the project continued to advance. \r\nDisney Enterprises have reportedly purchased a large tract of land \r\nalong the Atlantic Ocean for development as a beach resort. Most \r\nmajor resort areas in the District report a good summer season. \r\nHotel and motel occupancy on Florida's Gold Coast is running well \r\nahead of last year. Auto racing events are having a favorable impact \r\non income in central Alabama. Attendance at the annual Walking Horse \r\nCelebration in Shelbyville, Tennessee, increased to 120,000 this \r\nyear.\nThe depressed airline industry in the Miami area is reportedly \r\nbottoming out and headed for improvement. A textile mill that \r\nrecently closed in Alabama may be reopened by another firm. Plant \r\nannouncements include a conveying equipment plant in Mississippi, a \r\nstove manufacturing plant in Georgia, and a plant to manufacture \r\ncampers in Tennessee.\nThe retail sales outlook is mixed. An improvement in consumer \r\nsentiment is reported in some areas, but no substantial or \r\nwidespread pickup in consumer spending is reported.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-09-mi

"Beige Book Report: Minneapolis\nSeptember 15, 1971\nAlthough bank directors have noticed very little change in District \r\nbusiness activity since President Nixon announced his new economic \r\npolicy, they do feel that the new program has acted to build \r\nconsumer confidence. The directors consider it still too early, \r\nhowever, to assess the impact on investment spending. At the same \r\ntime, the recent changes instituted by the Federal Home Loan Bank \r\nBoard (FHLBB) are not expected to have a significant effect on \r\nhousing in this District.\nSeveral directors reported a modest pickup in consumer spending in \r\ntheir areas since August 16, but no consensus exists as to how the \r\nPresident's program has affected District automobile sales. Three \r\ndirectors reported poor car sales due to consumer uncertainty over \r\nwhether or not the excise tax will be eliminated, while two others \r\nreported a strengthening in automobile sales in their areas since \r\nAugust 16. A newspaper survey of Minneapolis/St. Paul automobile \r\ndealers revealed that car sales improved during the last two weeks \r\nof August.\nIn assessing the impact of the President's program on business \r\ninvestment spending, directors' replies varied from it would have \r\n\"no effect\" to it was \"too early to assess its impact\". In addition, \r\nresponses to an informal telephone survey of ten Twin Cities \r\nmanufacturing firms agreed with the directors' observations.\nWhen asked what would be an appropriate follow-up to the wage-price \r\nfreeze after November 12, the directors advocated everything from a \r\ncontinuation of the freeze to a strong \"jawboning\" program. In \r\ngeneral they felt that jawboning alone would not be sufficient to \r\nrestrain inflationary pressures, but they opposed the imposition of \r\nan elaborate set of wage-price controls. Several directors favored a \r\nprogram that would allow major industries to grant wage increases in \r\nline with productivity gains. They realized that such a program \r\nwould be difficult to administer and would require some type of \r\nbureaucracy. One director felt that people expect more controls and \r\nbureaucracy, while another stated that \"such controls would be \r\neasier to administer today than during World War II and the Korean \r\nwar because goods are not as scarce as they were and purchasers have \r\nmore than one supplier from whom to obtain goods and services\". \r\nStill another director said that dividends should be frozen for some \r\ntime in the future, and something should be done at least to give \r\nthe appearance that interest rates are being controlled. These steps \r\nwould make wage-price controls more palatable to the man on the \r\nstreet. A freeze on taxes, especially property taxes, was advocated \r\nby one bank director, and another recommended the elimination of the \r\n10 percent surtax on imports.\nIndications are that the unsettled foreign exchange rate situation \r\nof recent weeks has had little effect on business loan demand among \r\nlarge Ninth District banks. At several banks, inactive lines of \r\ncredit extended to Japanese banks have been reactivated since mid-August. The amounts involved were relatively small, however, and did \r\nnot cause an unusually large increase in business loan demand.\nSome strengthening in business loan demand has developed for \r\ninventory buildups and public nonresidential construction. No \r\nReserve city banks, however, have experienced unusually strong \r\ndemand for business loans recently, and most have revised downward \r\ntheir expectations for the next several months. While not \r\nanticipating greater-than-seasonal expansion, about half of the \r\nbankers sense underlying strength in business loan demand and expect \r\nto see positive results of policy changes.\nContrary to the opinions expressed by FHLBB officials, the general \r\nfeeling among industry people in the Twin Cities is that recent \r\nchanges by the FHLBB will have only a marginal effect on housing in \r\nthis area. The lower liquidity requirements will have no effect, as \r\nlocal savings and loan associations had higher-than-required \r\nliquidity ratios and savings and loan associations in this area have \r\nnot been selling mortgages to the Federal Home Loan Mortgage \r\nCorporation to any great extent. The change to 95 percent for \r\nmortgage loans, however, is expected to result in higher loan \r\nactivity.\nSavings and loan associations prefer to make conventional \r\nloans, and the lower downpayment requirements will make this type of \r\nborrowing more attractive to potential homeowners.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-09-da

"Beige Book Report: Dallas\nSeptember 15, 1971\nPresident Nixon's new program for economic stabilization improves \r\nthe prospects for the economy of the Southwest, in the opinion of \r\npast and present nonbank directors of this Bank and its branches. \r\nMost expect moderate increases in economic activity and employment \r\nfor the remainder of this year and the first half of 1972, coupled \r\nwith a lower rate of increase in retail prices. However, some \r\nbelieve that greater price stability will be attained only if some \r\nkind of guidelines program follows the ninety-day freeze on wages \r\nand prices. Most felt that planned plant and equipment expenditures, \r\ninventory investment, and employment in their firms would not be \r\ngreatly influenced by the President's program within the next nine \r\nmonths. The floating of the dollar is expected to have a small\r\nfavorable impact on the export sales of the firms of these \r\ndirectors, while the cost of imported materials and supplies used by \r\nthe respondent's firms is anticipated to increase moderately.\nAlthough two thirds of the directors expect that the President's \r\nprogram will increase demand for their firms' products over the next \r\nnine months, only a minority feel that capital expenditures, \r\ninventory investment, and employment in their firms will be \r\nmaterially increased as a result. About a third of the respondents \r\nthink that the proposed investment tax credit will increase planned \r\nplant and equipment expenditures through mid-1972. And about one \r\nhalf of those expecting an increase indicate that the rise would be \r\na net addition to already planned expenditures. Others state that \r\nthe increase should be attributable mainly to a moving ahead of \r\nexpenditures planned for some later time. Close to\ntwo-thirds of the \r\ndirectors do not anticipate that the proposed economic package will \r\naffect their planned inventory investment. Also only about a third \r\nfeel it will increase employment in their firms over this period.\nThe President's freeze is apparently having a significant impact on \r\nboth the wages and prices of the respondents' firms. When the freeze \r\nwas announced, two thirds of the firms had planned wage increases, \r\nwhile half were anticipating raising their prices. These planned \r\nwage increases would have averaged almost 7 percent, while \r\nanticipated price advances would have totaled almost 4 percent. If \r\nthe wage-price freeze ends after the ninety-day period, and no other \r\nlimitations are imposed, nearly half believe that their firms would \r\nincrease wages and prices.\nOn balance, President Nixon's economic package is expected to have \r\nlittle impact on the profits of the firms of the directors through \r\nmid-1972. Forty percent feel there will be no impact on profits, \r\nwhile 30 percent expect profits to rise as a result, and 30 percent \r\nanticipate they will fall.\nThe floating of the dollar in the international exchange markets \r\naffected only about half of the respondents' firms. For those that \r\nwere affected, only a few anticipate that their export sales and \r\nforeign investments will increase over the next nine months. On the \r\nother hand, most anticipate that the cost of imported materials and \r\nsupplies will rise moderately. In the current situation of the \r\nfloating of the dollar, a majority of those directors' firms \r\naffected indicate that their firms absorb the foreign exchange risk \r\non both exports and imports. In a few cases, the foreign exchange \r\nrisk is shifted to the trading partner, and in one case the risk is \r\nshared by the director's firm and the trading partner.\nDistrict data indicate that recent economic conditions were \r\nsluggish. Preliminary estimates indicate that the seasonally \r\nadjusted Texas industrial production index fell slightly in July, \r\nwith all sectors sharing in the drop except utilities, which \r\nremained unchanged. Durable goods manufacturing was off somewhat \r\nfrom the month before; the only industry group in durable goods \r\nshowing a significant increase over the previous month was that \r\nproducing lumber and wood products. In nondurables manufacturing, \r\ntextile mills showed the only significant gain. Registrations of new \r\npassenger automobiles in four major reporting areas in Texas were 12 \r\npercent lower in July than in June. Department store sales were 4 \r\npercent higher in the four-week period ended August 28 than in the \r\ncorresponding period a year before. Total nonagricultural wage and \r\nsalary employment fell slightly in July, interrupting a fairly slow \r\nbut continuous rise since January. Oil allowables for both Texas and \r\nLouisiana have been cut for September. This was the fifth \r\nconsecutive monthly drop for Texas. Agricultural conditions in the \r\nEleventh District are generally improved as rainfall has increased \r\nthe production outlook for several crops and offered relief to \r\nlivestock. However, the rains now present some threat to crops, \r\nespecially cotton and sorghum, as harvest is being slowed and some \r\nquality damage noted.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-09-cl

"Beige Book Report: Cleveland\nSeptember 15, 1971\nBusiness and bank economists attending the meeting of the Fourth \r\nDistrict Business Economists Roundtable on September 10 at the \r\nFederal Reserve Bank of Cleveland expect an acceleration in real \r\ngrowth next year, with limited additional stimulus expected as a \r\nresult of the President's new program. The economists viewed the \r\nneed to improve confidence as a key element in the domestic part of \r\nthe program which, hopefully, will be translated into higher \r\nconsumer and business spending. Our directors reported signs of \r\nincreased activity appearing in various market areas, but the \r\neconomists, our directors, and other businessmen contacted are \r\nwaiting to see what the Congress will do with respect to the \r\nAdministration's legislative proposals.\nThe consensus of about forty economists who attended the roundtable \r\nmeeting at this Bank was that the President's program will add \r\nsomewhat to the overall strengthening of the business expansion in \r\n1972, and reduce the rate of inflation temporarily. Unemployment is \r\nexpected to remain high but move down gradually during the year. \r\nBeginning with the fourth quarter of 1971 and continuing throughout \r\n1972, the economists projected current dollar gains in GNP averaging \r\n$25 billion per quarter. The group's median forecast called for real \r\ngrowth next year of 5.6 percent, a rise in the GNP price deflator of \r\n3.2 percent (but accelerating to about a 4 percent rate by the end \r\nof next year), and unemployment averaging 5.5 percent for the year \r\n(but declining to 5.2 percent by the yearend). In general, the \r\neconomists reported that it was too early to determine what effect \r\nthe proposed investment tax credit would have on the magnitude and \r\ntiming of their firms' capital expenditures in 1972.\nIn most cases, capital spending plans are still in the formative \r\nstages and have yet to be presented to boards of directors for \r\napproval. Furthermore, many firms are waiting to see what the \r\nCongress will do about the tax credit; there was some uncertainty \r\nabout whether or not the Congress will legislate the full 10 percent \r\ntax credit, and then lower it to 5 percent next August.\nSteel industry economists reported that the current inventory \r\nliquidation is proceeding more rapidly than usual, and should be \r\ncompleted by the year-end. Compared with previous\nlabor-contract \r\nyears, the liquidation is faster this year not because steel \r\nconsumption is any faster, but because customers are not placing \r\ntheir usual orders after the contract settlements.\nBusiness economists whose firms and industries are dependent on the \r\nautomotive market agreed that a reasonable forecast for new car \r\nsales next year is 10.5 million units, with imports accounting for \r\n1.7 million units. These economists estimated that about 200,000 \r\ncars were added to 1971 sales as a result of last year's General \r\nMotor's strike, which should bring this year's total to about 10 \r\nmillion units. A normal auto year in 1972, according to these \r\neconomists, would have called for sales of 10.2 million. Thus, the \r\nproposed repeal of the 7 percent excise tax credit on new cars is \r\nexpected to stimulate next year's new car sales by roughly 3 \r\npercent.\nMost of the economists attending the meeting were somewhat dubious \r\nabout the likelihood of limiting wage-price increases after the \r\n\"freeze\" expires, and thought that any guidelines established would \r\neventually be eroded. In that connection, Professor Richard Selden, \r\nUniversity of Virginia, who attended the meeting as a guest speaker, \r\nwas critical of incomes policies (citing the usual arguments) and \r\nnoted that such policies were not particularly successful in many \r\nEuropean countries. His view was that inflation could be eliminated \r\nonly if the central bank maintained the money supply growth at a \r\nrate consistent with the nation's rate of potential real economic \r\nexpansion.\nOur industrial directors commented at meetings held in early \r\nSeptember that the President's program had not yet had visible \r\nimpact on their firms' sales or production. One director, the \r\npresident of a machine tool company, expects a short-run depressing \r\neffect in his industry until the Congress acts on the investment tax \r\ncredit. If it is approved, he believes small companies will be the \r\nfirst to place orders for machine tools, and large companies the \r\nlast to react. A long lag is likely on the part of large companies \r\nbecause the ordering of machine tools starts in the engineering \r\ndepartment and works its way up to the board of directors for \r\napproval. The directors did not think it likely that the machine \r\ntool industry would begin to benefit from the tax credit until about \r\nmid-1972.\nOn the financial side, our Bank directors commented that they would \r\nbe willing to keep interest rates down on the asset side of their \r\nbalance sheet but they were concerned over how to keep interest \r\nrates from rising on the liability side. Other bankers in the \r\nDistrict recently contacted said the only real strength during \r\nAugust was a \"phenomenal\" rise in bankers' acceptances from foreign \r\ncustomers.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/1971/1971-09-su

"Beige Book: National Summary\nSeptember 15, 1971\nThe latest Red Book reports from the District Banks are on the whole \r\nmore bullish regarding the economic outlook than the reports of \r\nrecent months. The President's new economic program has been, in \r\ngeneral, very well received throughout the country. To be sure, with \r\nthe possible exception of the temporary \"freeze,\" which appears to \r\nhave been almost fully accepted by all segments of the economy, the \r\nactual impact of the program on economic activity is as yet barely \r\ndiscernible. Consumer spending was already on the rise during the \r\nfirst half of August, before the announcement of the program, and it \r\nwas generally felt that, apart from some marginal situations, the \r\nproposed business investment tax credit is not likely to \r\nsignificantly stimulate capital outlays so long as the rate of \r\nutilization of existing capacity remains low. Nevertheless, the \r\nprogram seems, at the very least, to have had a beneficial \r\npsychological impact, halting the erosion in confidence that had \r\nbeen developing in previous months. Reports of the effect of the \r\nprogram on domestic business firms' demand for bank credit were \r\nmixed.\nA rise in consumer spending during August was reported by most \r\nDistrict Banks. The St. Louis Bank noted a continued moderate upward \r\nmovement in retail sales in most major centers of that District, \r\nwith sales in Memphis rising sharply in recent days. In the Chicago \r\nDistrict, sales of domestically produced major appliances were \r\nrunning above last year's level, with the margin of gain widening. A \r\npickup in retail sales was also reported by the Richmond and New \r\nYork Banks, and retailers in the latter District are looking forward \r\nto the Christmas season with optimism.\nResidential construction has been continuing at a high level in a \r\nnumber of Districts. This development is having a favorable effect \r\non several industries. The San Francisco Bank mentioned the lumber \r\nindustry in particular, while the Chicago and St. Louis Banks \r\npointed to home furnishing and appliance manufacturers as well as \r\nbuilding supply industries.\nNear-term prospects for increased business outlays for plant and \r\nequipment, however, are not regarded as particularly bright, \r\nalthough respondents in several Districts look for some improvement \r\nin the long run. The main deterrent to a pickup in such outlays at \r\nthis time is, of course, the relatively low rate of utilization of \r\nexisting facilities. The Richmond Bank, for example, reports that \r\nthe overwhelming majority of manufacturers contacted believe that \r\ntheir current plant and equipment is adequate, or more than \r\nadequate. Most respondent firms in the St. Louis District indicate \r\nthey are operating at less than capacity and have no immediate plans \r\nfor plant expansion. In the New York District there are also doubts \r\nabout any near-term stimulus from the proposed investment tax \r\ncredit. Businessmen may, in general, be more optimistic than \r\npreviously, but they seem to be adopting a \"wait-and-see\" attitude. \r\nWhile they are perhaps reexamining marginal investment projects more \r\nclosely, they also seem to be waiting for projected sale increases \r\nto materialize.\nThree Districts reported some pickup in loan demand by domestic \r\nbusiness firms that may not have been directly attributable to \r\nrecent international developments. Some of the bankers contacted in \r\na special System survey by the New York and Minneapolis Banks \r\nattributed the increase partly to inventory building. The other \r\nseven Federal Reserve Banks that reported on their survey results \r\nindicated domestic demand for business loans had remained \"weak\" or \r\n\"unchanged\". Indeed, Kansas City commented that \"the deterioration \r\nnoted in July appears to have continued into late August\", and \r\nRichmond observed that not only has there been \"no evidence of \r\nunusual strength in business loan demand\" but \"pressure for business \r\nloan commitments appears to have abated\" since the wage-price \r\nfreeze. Four Districts commented on bankers' expectations regarding \r\nbusiness loan demands over the next few months, noting that these \r\nexpectations were generally on the \"hopeful\" side. Interestingly, \r\ntwo of these Districts, Philadelphia and Minneapolis, were among \r\nthose reporting some recent strengthening. The other two were St. \r\nLouis and Dallas.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/1971/1971-09-kc

"Beige Book Report: Kansas City\nSeptember 15, 1971\nSupport for the President's new economic program in the Tenth \r\nDistrict is widespread among businessmen and consumers. At least one \r\nlabor group has postponed bargaining sessions, and one union has \r\ntaken a case to the United States District Court asking that \r\nemployers be ordered to comply with a bargaining agreement reached \r\nlast year calling for a wage increase on September 1. District \r\nbankers report no moves to increase interest rates. Aside from \r\nspecial factors, business loan demand remains weak.\nThe results of a survey of members of the boards of directors of the \r\nFederal Reserve Bank of Kansas City and its branches, and of other \r\nbusiness in the Tenth District, indicate that the President's new \r\neconomic program has been favorably received by both business and \r\nconsumers. The psychological impact on both groups was described as \r\nexcellent, and most parts of the program are generally receiving \r\nstrong public support. In several instances, respondents voiced the \r\nview that they would have preferred to see the wage-price freeze \r\ninstituted earlier, by from six months to two years.\nThere was wide agreement that the time period since the new \r\nprogram's beginning has been too short to permit an accurate overall \r\nassessment of its impact on economic activity. An important Omaha-based mechanical contractor noted that companies are apparently \r\nholding off on new plant and equipment spending until they see \r\nCongressional disposition of the proposed investment tax credit. If \r\nthe Congress approves the credit, he expects increased activity in \r\ncommercial and industrial construction in the Tenth District.\nIncreased consumer confidence, as a result of the new program, was \r\ncited by persons from several states as providing a stimulus to \r\nretail trade with some increases already apparent. Automobile sales \r\nare generally good. A survey of new car dealers in the Kansas City \r\narea showed that customers and dealers alike are confident that the \r\nFederal excise tax on new cars will be repealed on a retroactive \r\nbasis. Although the dealers, like other businesses, were generally \r\npleased with the wage-price freeze, some were apparently having \r\ndifficulty in providing an attractive price on leftover 1971 models.\nA representative of a large airline company reported that domestic \r\nair transport business on east-west routes continues to be weak. \r\nWith revenues not reaching expectations, this airline is making \r\nfurther employment reductions in an attempt to keep its costs down. \r\nAs a result of the wage-price freeze, the company's bargaining \r\nsessions with its 20,000 mechanics have been postponed. One special \r\ncase of interest concerns a Kansas City International Brotherhood of \r\nElectrical Workers Local which filed suit in United States District \r\nCourt asking that electrical contractors be ordered to comply with a \r\ncollective bargaining agreement reached last year, under which the \r\nelectricians were to have received on September 1 wage and fringe \r\nbenefit increases totaling $1.00 per hour. The union maintains that \r\nthe contractors will be receiving windfall gains, due to their \r\nbidding of contracts at prices which included the expected wage \r\nincrease, and that this is an inequity that will not be righted \r\nafter the freeze ends. The contract involved was settled by \r\ncompulsory arbitration, without a strike and at wage increases \r\ndescribed by the local's business manager as substantially below \r\nthose received by other construction industry unions here. There has \r\nbeen no court decision yet in this case.\nDeposit flows into Tenth District banks in the last half of August \r\nhave shown greater strength than the moderate pattern that \r\ncharacterized July and early August. This was true for both demand \r\ndeposits and time deposits. Although a moderate increase occurred at \r\nthe larger banks in consumer type time and savings deposits in late \r\nAugust, these accounts have shown virtually no net change at large \r\nbanks since midyear. Bankers queried on this point do not appear \r\nconcerned with this development, although some expressed relief that \r\nmarket interest rates have declined since\nmid-August. As in July, \r\nTenth District banks increased their holdings of large CDs in \r\nAugust.\nWith regard to loan demand, residential mortgage and construction \r\nloans along with consumer installment loans remain the areas of \r\nstrength in the Tenth District. Bankers contacted have detected no \r\nunusual increase in applications for consumer loans since mid-August. However, some are anticipating an increase and have stepped \r\nup their promotional activities since the announcement of the new \r\neconomic program. Aside from special factors related to the \r\ninternational situation, business loan demand remains weak. The \r\ndeterioration noted in the July report appears to have continued \r\ninto late August. Respondents profess to anticipate some \r\nimprovement, but are not overly optimistic.\nBankers in the Tenth District appear to support the new economic \r\npolicies. There are no moves to increase interest charges on any \r\nloans. On the other hand, there appears to be no rush to lower \r\ninterest charges. Most respondents are adopting a \"wait-and-see\" \r\nattitude toward the changed economic and financial situation.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/1971/1971-09-sl

"Beige Book Report: St Louis\nSeptember 15, 1971\nA moderate uptrend of business activity continues in the Eighth \r\nFederal Reserve District. Businessmen report some improvement in the \r\neconomic atmosphere as a result of the President's new economic \r\nprogram.\nMost manufacturing industries in the District have gradually \r\nincreased their rate of operations in recent weeks. One box board \r\ncompany reports that it is operating with some overtime now, whereas \r\nin the early summer months overtime was eliminated altogether. A \r\nnumber of other firms which were operating at less than full time \r\nare now back on a\nforty-hour week. Most firms, however, indicate \r\nthat they are operating at less than plant capacity and have no \r\nimmediate plans for plant expansion.\nAll industries associated with home building generally remain \r\nstrong. Housing starts continue at a high rate, and such activity is \r\nhaving a favorable effect on both the industries that manufacture \r\nbuilding supplies and those that manufacture refrigerators, stoves, \r\nand other appliances for furnishing new homes.\nDespite the general uptrend, layoffs and rising unemployment were \r\nreported in some scattered geographic areas. For example, one plant \r\nwhich produces flash bulbs in a small Eighth District community \r\nreports a 50 percent reduction in its work force, which had a major \r\nimpact on the community's economy. In contrast, another small \r\ncommunity reported an unemployment rate in excess of 20 percent in \r\nApril as a result of a major reduction in the work force at two \r\nspecialized firms, but at the most recent reporting date the rate \r\nhad declined to about 14 percent.\nRetail sales continue to move moderately upward in most major \r\ncenters in the Eighth District. Memphis reports a significant \r\nincrease in sales during the past ten days. Major retailers in St. \r\nLouis report little change in sales, but quickly add that there has \r\nbeen a rising number of competitors in the area and that individual \r\nfirm data are a poor indicator of total sales.\nBank loan demand remains almost unchanged after adjustment for \r\nseasonal factors. Increases in loans to primary metals produced in \r\nrecent weeks were offset by net repayments by commodity dealers. \r\nMost banks interviewed expect a moderate strengthening in loan \r\ndemand during the next few months. Bank deposits of large member \r\nbanks have declined slightly in recent weeks, but savings and loan \r\nassociations report savings inflows are again at a high rate \r\nfollowing a dip in July.\nMost firms interviewed expressed a favorable attitude toward the \r\nPresident's new economic program. Representative comments were that \r\nit was long overdue, it should not be placed on a voluntary basis, \r\nand there will be a surge in prices once the freeze is lifted. Some \r\nexpect to benefit over the longer run from the higher tariff on \r\nimports. It was pointed out that such gains will not come \r\nimmediately because of the established channels of trade and the \r\nnumerous contracts which have already been placed with foreign firms \r\nfor goods. American manufacturers will thus require several months \r\nto recapture these markets.\nAll the firms which commented on the program are well pleased with \r\nthe investment tax credit and excise tax reduction proposals. An \r\nofficial of one manufacturing establishment reports that his company \r\nhas already started plans for the installation of some new equipment \r\nin anticipation of the more favorable tax treatment.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/1971/1971-09-ny

"Beige Book Report: New York\nSeptember 15, 1971\nComments by the directors of the New York Bank and the Buffalo \r\nbranch and conversations with some large retailers indicate that \r\ninitial reaction to the President's new economic program has been \r\nfavorable and that there is cautious optimism regarding the future. \r\nAn improvement in consumer spending, which had started to manifest \r\nitself even before August 15, was reported as the brightest current \r\ndevelopment, but doubts were expressed about any\nnear-term stimulus \r\nfrom the proposed investment tax credit. Most directors thought \r\nthere would be good compliance with the wage-price freeze during \r\nPhase One, but some anticipated there would be problems if the \r\nfreeze were extended.\nConsumer spending reportedly has shown definite improvement compared \r\nwith previous months. One of the directors, associated with a \r\nRochester department store, \"sensed\" that consumers approved of the \r\nPresident's program; he noted that since August 15 the pickup in \r\nAugust retail sales had become more pronounced. The chairman of the \r\nboard of a large New York City bank and the president of an upstate \r\nbank also thought consumer confidence had improved, but the latter \r\ndirector commented that it remained to be seen to what extent, and \r\nwhen, this improvement would be reflected in increased consumer \r\noutlays. The two retailers who were contacted by telephone, who have \r\nstores nationwide, reported that business had been quite good \r\nthroughout August and that the President's announcement seemed to \r\nhave had only little effect in increasing consumer demand further. \r\nThey observed that other department store officials with whom they \r\nhad discussed the matter had had this same experience. The retailers \r\nindicated they were quite optimistic about the forthcoming holiday \r\nseason.\nThe directors thought that although business confidence may have \r\nbeen strengthened somewhat by the President's new program, there was \r\nlittle likelihood that the investment tax credit would bring a \r\nsignificant spurt in capital outlays over the near term, primarily \r\nbecause of the current low rates of utilization of existing plant \r\nand equipment. Directors in Buffalo thought that for those \r\nbusinesses that had already made capital spending plans, \"the \r\nreinstatement of the tax credit would be a windfall\", while for \r\nthose who \"had been on the fence\" concerning a project, passage of \r\nthe proposed legislation \"might trigger a decision to move ahead\". \r\nOne of the New York Bank directors noted that \"much of the American-made machinery and equipment affected by the tax credit uses \r\nforeign-made parts\". However, the chairman of the board of a large \r\nNew York City bank believed the tax credit would promote capital \r\nspending \"ultimately\", and another director thought the proposed \r\ncredit would stimulate those investments that would \"save labor \r\ncosts and cut operating expenditures\".\nMost directors thought there would be little, if any, erosion of \r\ncompliance with the wage-price freeze over the ninety-day period. \r\nBuffalo branch directors observed that the short period involved and \r\nthe fact that noncompliance would stand out made the current freeze \r\nself-enforcing. Several of these directors, however, looked for \r\nenforcement problems if the freeze were extended, while the chairman \r\nof the board of a large New York City bank felt that \"a myriad of \r\nadministrative problems would appear\" even during Phase One. Another \r\ndirector, the president of a nationwide manufacturing concern, \r\nexpects an erosion in compliance \"as time goes on\", and the \r\npresident of an upstate bank said he believes some people are \r\n\"trying to find ways to secure exceptions to the freeze\".\nMost respondents to a survey of six large New York City banks \r\nindicated that some unexpected growth in demand for business credit \r\nhad developed at their institutions in recent weeks over and above \r\nthe increases that clearly reflected post-August 15 developments in \r\nthe foreign exchange markets, but the majority had no explanation \r\nfor this apparent strength or declared their particular bank's \r\nexperience was related to something unique. The few explanations \r\nthat were offered focused primarily on inventory building. \"Prudent \r\nbusinessmen feel they should get in their stocks while the freeze is \r\non. \"Distributors are expecting a very strong Christmas.\" \"Perhaps \r\nthere is some inventorying in anticipation of a longshoremen's \r\nstrike on the East and Gulf Coasts.\" Nonetheless, probably a major \r\npart of the huge increase in loans to wholesalers, which constituted \r\nthe biggest rise, was attributable to borrowings made immediately \r\nprior to the flotation of the yen by Japanese trading concerns \r\nresident in the United States.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nSeptember 15, 1971\nOur directors were asked to comment on the recent changes in \r\ndomestic and international policy by President Nixon. The general \r\nreaction is favorable, with most directors expressing the view that \r\nthere would be beneficial effects on the economy, especially in \r\ncontrolling inflation. The impact on current economic activity is \r\nsmall\u2014except perhaps for automobile sales\u2014for future prospects are \r\nseen as being improved.\nThe wage-price freeze is thought to be helpful in reducing \r\ninflationary expectations and in improving consumer attitudes to \r\nsome degree. On the other hand, several directors commented on the \r\nneed for continuing some form of restraint after the ninety-day \r\nfreeze is over, including provisions to prevent retroactive wage \r\nincreases.\nOf the proposed tax changes, the removal of the automobile excise \r\ntax is expected to have the greatest immediate impact. Automobile \r\nsales already have increased in some areas and are expected to do so \r\nin others. This sales increase will apply to foreign as well as \r\ndomestic cars. The tariff surcharge on imported cars will be offset \r\nby the lower excise tax so that their prices may not change very \r\nmuch even after allowing for exchange rate revaluations. The \r\ninvestment tax credit is expected to stimulate some more investment \r\nin the future when plans can be revised. One director whose firm \r\nproduces heavy industrial machinery reported that, although orders \r\nhave not risen, requests for quotations have started to increase, \r\nand he regards this as a sign of more capital spending.\nThe reaction to the international policy changes, although favorable \r\noverall, was qualified by several directors who expressed concern \r\nover foreign retaliation, especially if the surcharge is maintained \r\nfor any period. One director reported that there is some evidence \r\nthat oil exporting nations will be pressing actively for price \r\nadjustments that will result in higher dollar prices for oil. The \r\namount of benefits of the surcharge to domestic producers will vary \r\naccording to whether or not a full 10 percent surcharge could be \r\napplied. A producer of structural steel sees little benefit for his \r\ncompany's sales prospects; foreign structural steel will be taxed \r\nonly 2 percent more and he said Japanese producers indicated that \r\nthey would absorb any difference arising from the appreciation of \r\nthe yen.\nOn the international side, the West Coast dock strike is perhaps of \r\ngreater concern at the moment than the possible effects of the \r\nsurcharge and any changes in the external value of the dollar. This \r\nstrike continues to hurt domestic exporters (of wheat and rice, for \r\nexample) and it may cause the loss of foreign markets if it \r\ncontinues.\nConstruction, especially residential construction, continues to be a \r\nsource of strength. The wage-price freeze is expected by some of our \r\ndirectors to help further by reducing cost increases. The only \r\nevidence of weakness consists of high apartment vacancy rates in \r\nsome areas\u2014southern California, for example. The lumber industry is \r\nbenefiting from this level of construction activity, and the wage-price freeze happened to result in a structure of prices favorable \r\nto further activity.\nProspects in agriculture are improved both because of good crops and \r\nthe freezing of costs. In particular, the outlook for fruit and \r\ncattle is good. The only major problems are faced by those producing \r\nfor foreign markets because of the dock strike, and some crops \r\nfacing limited storage space. Bankers reported willingness to \r\ncooperate in keeping interest rates level over the longer period. \r\nLoan demand, both by business and consumers, is expected to rise, \r\nbut no major adjustment will have to be made by bankers as a result \r\nof the new economic policies.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"Beige Book Report: Richmond\nSeptember 15, 1971\nLatest survey data, coupled with informal reports from this Bank's \r\ndirectors, indicate that economic conditions in the Fifth District \r\ncontinue in a moderate uptrend. The manufacturing sector has \r\napparently registered some further improvement over the past four \r\nweeks, while retail sales continue to expand at the recent moderate \r\npace. Construction activity remains strong in all District states. \r\nBanking respondents report strong demand for consumer loans but no \r\nunusual strength in demand for other classes of loans. All of our \r\ncontacts indicate that confidence among both businessmen and bankers \r\nhas been sharply improved since announcement of the President's new \r\neconomic program.\nManufacturers in our latest survey report further increases in new \r\norders and shipments and a small increase in backlogs. A reduction \r\nin inventories is also indicated, although many manufacturers \r\ncontinue to view their inventory levels as high relative to sales \r\nprospects. Employment is down in some industries, notably steel, \r\nelectronics, paper, and chemicals, and a number of manufacturers \r\nreport a small reduction in the length of the workweek. The \r\noverwhelming majority of manufacturing respondents believe that \r\ncurrent plant and equipment is adequate or more than adequate.\nIn the trade and services area, respondents report that retail sales \r\ncontinue to rise at about the same pace as in the preceding \r\nreporting period. Banking respondents report further gains in \r\nautomobile sales and sizable increases in consumer loan demand. \r\nTrade respondents believe that their inventories, which have risen \r\nsomewhat over the past four weeks, are high relative to current and \r\nprospective sales. No change is indicated in trade and services \r\nemployment.\nConstruction spending continues strong in all District states, \r\nalthough the number of respondents reporting increases in \r\nresidential building is down from the preceding survey. Bankers \r\nreport some slackening in the demand for mortgage loans but demands \r\nfor such loans have been unusually heavy in recent months.\nThe diffusion of responses from bankers suggests little more than \r\nseasonal increases in business loan demand. A special telephone \r\nsurvey of senior officers of large District banks turned up no \r\nevidence of unusual strength in business loan demand since \r\nannouncement of the President's new economic program. These bankers \r\nindicated, as a matter of fact, that pressure for business loan \r\ncommitments appears to have abated since the wage-price freeze was \r\ninstituted.\nCash receipts from farm marketings in the District in the first half \r\nof 1971 were 2 percent below the comparable period a year earlier, \r\nwith reductions in livestock receipts accounting for all the \r\ndecline. The season's gross returns from flue-cured tobacco \r\nmarketings through September were up 12 percent, as prices were 4 \r\npercent higher and volume of sales were up 7 percent.\nBoth businessmen and bankers have reacted favorably to the wage-price freeze, although both groups remain concerned about the shape \r\nof the program for Phase Two. Our latest survey showed a sizable \r\njump in the number of respondents expecting improvement in general \r\neconomic conditions in the near future. More than half the banking \r\nrespondents now fall into this category.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"Beige Book Report: Boston\nSeptember 15, 1971\nWhile there is no firm evidence of a strengthening in business \r\nactivity, expectations are more bullish and there are tentative \r\nsigns of a quickening in business investment spending.\nA special survey of the District's eight largest commercial banks \r\ndisclosed no pickup in domestic business loans during August and \r\nearly September. Domestic business loan demand continued sluggish in \r\nthis period, with only a few banks expecting a revival in the coming \r\nmonths. Five of the banks reported an expansion of credit resulting \r\nfrom the unsettled international monetary situation. These banks \r\nreported that outstanding lines of credit to Japanese banks were \r\ndrawn to their full, and there were reports that some banks were \r\nunable to satisfy the demand for foreign credit due to the banks' \r\nparticipation in the voluntary credit restraint program. One bank \r\nreported participating in Japanese loans while one or two other \r\nbanks reached their guideline ceilings.\nMost of our directors were on vacation this week and could not be \r\nreached. Both directors contacted indicated that President Nixon's \r\neconomic policies have dramatically changed attitudes in the \r\nbusiness community. The directors summarized the response as \"a 180-degree shift in regard to prospects\". While there is no firm \r\nevidence of a pickup in business activity, there are tentative signs \r\nof a revival in business capital spending, tied to the passage of \r\nthe investment tax credit. A large machine tool manufacturer is \r\nfinding increased interest, but no increase in orders yet. A \r\ndistrict railroad is reported to have speeded up the introduction of \r\nautomatic signaling equipment as a result of the investment tax \r\ncredit. The processed engineering division of a large conglomerate \r\nis now increasing its order backlogs, as is a division manufacturing \r\nheavy industrial engines.\nNo problems were reported by bank directors arising from \r\nimplementing the wage-price freeze.\nAll our academic respondents were concerned about the slow pace of \r\nthe business recovery, despite the President's new economic \r\npolicies. Professor Wallich was skeptical about the short-term \r\nimpact of the President's announcement that the freeze would \r\ndefinitely end November 13. He felt that continuance of the freeze \r\nwas the President's biggest weapon\u2014that too much was given away too \r\nquickly. Nevertheless, Professor Eckstein believes improved price \r\nperformance is a political necessity, and thus is confident that \r\n\"the necessary steps will be taken after the freeze. Professor \r\nSamuelson and Tobin both expressed agreement with the Okun proposal \r\nfor Phase Two. Tobin is philosophically disposed toward limiting the \r\npower of a wage-price review board to publicity and not giving it \r\ncompulsory powers.\nEckstein's preferred fiscal package would include an increase in the \r\nminimum standard deduction, a \"permanent\" 10 percent investment tax \r\ncredit accompanied with elimination of the accelerated depreciation \r\nallowance, and a \"stabilization\" surcharge on corporate profits; \r\ni.e., raising the corporate income tax rate by 5 to 10 percentage \r\npoints. He feels that the proposed step-down from 10 to .5 percent \r\nin the investment tax credit rate is too disruptive and must be \r\nchanged in one of several ways: (1) exact a (smaller) permanent \r\ncredit, (2) make the transition more gradual, or (3) give the \r\nPresident discretion on the date for cutting or eliminating the 10 \r\npercent rate. Professor Samuelson felt the 10 to 5 percent step-down \r\nin the investment tax credit rate would have good intertemporal \r\neffects. He agreed that combining the tax credit with the asset \r\ndepreciation range (ADR) system was \"too much\"; Professor Tobin \r\nfeels ADR should be abandoned in any case. Opposing permanent losses \r\nin Federal revenues, Tobin advocates a one-year suspension of the \r\nauto excise tax and a one year 7 percent investment tax credit or, \r\nalternatively, a net investment credit.\nThere was some degree of agreement on the appropriate course of \r\nmonetary policy among three of the professors. To Tobin, \"this is \r\nnot the time for running a restrictive monetary policy.\" He fears a \r\nrepetition of 1968 in reverse; i.e., the authorities must avoid \r\noverestimation of the fiscal stimulus package. Tobin urges getting \r\ninterest rates down to the levels of last March and would not be \r\ndistressed if that entailed a 10 percent rate of growth in the money \r\nsupply. Although Samuelson wants attention focused on the rate of \r\nthe business expansion, not on any particular rate of growth of the \r\nmoney supply, when pressed, he said that he would be disappointed by \r\na rate of less than 6 percent. According to Eckstein, the primary\r\nresponsibility of monetary policy at present is to prevent long-term \r\ninterest rates from rising. Similarly, short-term rates should be \r\nheld \"relatively easy\" to \"let the program have its effect\". The \r\nsecondary responsibility of monetary policy during this period of \r\n\"watchful waiting\" is to avoid a rate of growth of the money supply \r\nof 10 to 12 percent. If there have not been more tangible signs of \r\nimprovement in the economy by the time of the next open market \r\ncommittee meeting, Eckstein concluded that monetary policy would \r\nhave to accept more of the burden of stimulating the economy's \r\nperformance. Professor Wallich, on the other hand, felt that \r\nmonetary policy should focus on getting back to a 6 percent rate of \r\nmoney supply, as long as this did not yield \"fabulous\" short-term \r\ninterest rates. He cautioned that continued rapid growth of the \r\nmoney supply risks building in future inflation.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"