Datasets:

khaihernlow

/

beige-books

like 0

St Louis

/beige-book-reports/1971/1971-08-sl

"Beige Book Report: St Louis\nAugust 18, 1971\nA moderate uptrend in business activity continues in the Eighth \r\nFederal Reserve District according to a select group of businessmen. \r\nRetail sales continue to expand in most of the larger centers. \r\nOrders from manufacturers have been spotty in recent weeks, but were \r\ngenerally higher on a seasonally adjusted basis than earlier in the \r\nyear. The employment situation is generally unchanged from a month \r\nago. There has been a pause in the rate of savings growth and \r\ninterest rates have continued to inch upward. Some banks, however, \r\nstill indicate a higher than desired level of liquidity and are \r\naggressively seeking business loans.\nAlthough retail sales remain sluggish at major department stores in \r\nSt. Louis, other District centers report sharp increases. One of the \r\nmajor St. Louis outlets reported early August sales to be a \r\ncontinuation of the rather dismal level in July. Another reported \r\nsome slight improvement of sales in August from the July level but \r\nwell below sales in June. In contrast to this experience, major \r\nretail stores in both Memphis and Louisville reported sharp gains in \r\nsales in July and August from previous months, on a seasonally \r\nadjusted basis, and from year-ago levels. One of the leading \r\nLouisville firms reported that August-to-date sales are up 12 \r\npercent from year-ago levels. Similarly, total retail sales in \r\nMemphis have in recent months exceeded year-ago levels by 15 percent \r\naccording to an official of a large department store.\nThe outlook for manufacturing activity ranges from pessimistic to \r\nquite optimistic, depending on the type of product. Manufacturers of \r\nsoftware and products associated with home construction report \r\noptimistic levels of sales and orders. On the other hand, steel \r\nproducers and replacement durable goods manufacturers are generally \r\npessimistic in their outlook for the next few months. Steel \r\nproducers report large inventories in the hands of consuming firms \r\nand low production prospects for the next six months while the \r\ninventories are being reduced. After the current inventories are \r\ndepleted, the outlook for steel is more promising. The replacement \r\nmarket for durable manufacturers is reported as being generally soft \r\nbut improving slowly.\nNine of the businessmen interviewed reported significant changes in \r\nemployment prospects. Some layoffs which have occurred in steel \r\nindustries have apparently been offset by new hirings by \r\nmanufacturers of home building and allied products. Most of those \r\ninterviewed, however, reported little change in number of employees, \r\nwhich indicated that new hirings only slightly exceeded the number \r\nleaving the firms.\nSavings flows into financial institutions have continued to \r\ndecelerate from the very high rates of last spring. The slowing has \r\nbeen most pronounced at commercial banks, but a slower rate of \r\nsavings growth has also been observed at savings and loan \r\nassociations. An occasional increase in rates paid to savers has \r\nbeen announced in recent weeks. Some banks which lowered the rates \r\npaid on passbook savings last spring have recently raised their \r\nrates back to Regulation Q ceilings. Rates on loans also continue to \r\ncreep upward. Nevertheless some banks continue to aggressively seek \r\nbusiness loans.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-08-bo

"Beige Book Report: Boston\nAugust 18, 1971\nThe economic recovery appears to be very weak in most business \r\nareas, but especially in the capital goods industries.\nMost of our directors reported no change from the sluggish business \r\noutlook that they had reported last month. Industries like precision \r\nbearings, superalloys, and machine tools which are tied to \r\ninvestment spending are still very weak, backlogs are shrinking and \r\nnew orders are either not higher or only slightly higher than a year \r\nago. Similarly, military aerospace orders are declining as are \r\nbacklogs. Orders for commercial aircraft engines are also being \r\nstretched out or in some cases canceled. Products connected with the \r\nhousing industry, like gas meters, are doing very well. The \r\nsettlement of construction labor contracts has also opened up \r\nbusiness for a supplier in the nonresidential building market.\nConsumer sales continue to be the best business area.\nA conglomerate \r\nmanufacturer of a large variety of consumer goods reports sales up \r\n10 to 11 percent from last year. Products for the home sewing market \r\nare particularly strong. As a result of rising sales volume, \r\ninventories are being allowed to rise. Of all the directors spoken \r\nto, this was the only indication of an easier inventory policy. And \r\neven this director stated that in other lines of his business, \r\ninventories were being kept at low levels.\nDespite the moderate rate of domestic auto sales, tire sales are \r\ndoing very well as a result of a good pickup in demand for \r\nreplacement tires and production of the 1972 models. This supplier \r\nto the auto industry was the only director to mention that business \r\nhad been affected by the rail strikes in July. Lack of supplies \r\ncaused his company to close 3 of its 6 plants for up to a week at \r\nthe end of July.\nAnother pessimistic note for domestic auto sales: a Ford dealer in \r\nour district, who had the second largest sales of any Ford dealer in \r\nthe nation, gave up his franchise in July because \"he saw the \r\nhandwriting on the wall\" for domestic autos.\nA bank director reported that while the bank is flush with deposits\u2014a 20 percent gain over last year\u2014the only demand for funds is for \r\nmortgages. Both business and consumer installment lending is very \r\nsluggish.\nOf our academic respondents, only Paul Samuelson and Eli Shapiro \r\nwere available for interviews before the President's speech. \r\nAccording to Professor Samuelson, the most discouraging aspect of \r\nthe present economic situation was the stubbornness of, almost the \r\nre-ignition of, the cost-push, administered price inflation. \r\nSamuelson emphasized strongly that it was a seller's inflation, not \r\nassociated with a too rapid growth of real output. Some kind of \r\nincomes policy was urgently needed. \"Whatever it is, I'm for it.\" \r\nEli Shapiro was opposed to the President's doing more than his \r\nrecent increased willingness to jawbone by periodically showing his \r\nalarm. To do more, he argued, is administratively too difficult to \r\nbe effective. On inflation, Shapiro viewed the evidence as extremely \r\nmixed.\nSamuelson described the behavior of real output as \"anemic.\" He \r\nexpected its future path to run at or below the \"fashionable \r\nforecasts.\" He found some encouragement in the 5.8 percent July \r\nunemployment figure, but was worried about the effect of the steel \r\nlayoffs on the August rate. Shapiro attached little importance to \r\nthe July figure. Anticipating a \"good\" fourth quarter, he expected \r\nunemployment to peak in the third quarter. By a good fourth quarter, \r\nhe explained, he meant a real growth rate of at least 4 percent and \r\nperhaps\nas high as 5 percent.\nShapiro believed monetary growth rates of 10 to 11 percent ran a \r\nsubstantial risk of encouraging inflation. He advocated moving in \r\nthe direction of a 6 percent rate of growth. Feeling no need for \r\nadditional monetary or fiscal stimulus, Shapiro's basic policy \r\nposition was to give the present policy course a little more time.\nAlthough we tried to contact all our respondents again after the \r\nPresident's talk, only Samuelson, Shapiro and one bank director were \r\navailable to comment on the President's new economic policies. The \r\nbank director felt the President's policies were \"exciting and \r\nradical.\" He hoped that the meetings in September would turn into \r\nanother Bretton Woods and that a new international monetary system \r\nwould emerge which would 1) control Eurodollar movements and 2) not \r\nentail a return to gold. He foresaw some difficulty in administering \r\nrates for non-prime rate borrowers but concluded that the controls \r\nmust be supported and made to work because this is the only policy \r\nwe have left to fight inflation.\nThe response of monetary authorities to the Administration's new \r\neconomic plans should be analogous to what it was during the Penn \r\nCentral crisis, Professor Samuelson said. Their role must be to \r\nassure everybody that there will be no credit, and no quality of \r\ncredit, crisis. For the immediate future, the next 90 days to six \r\nmonths, the aim of a 6 percent rate of growth in monetary aggregates \r\nmay be appropriate, though the Fed should not be preoccupied with \r\nany fixed figure and should be prepared to go to 8 to 11 percent. \r\nSamuelson noted that the flexibility of exchange rates creates new \r\nfreedom for interest rates and that the housing market may benefit \r\nin the future from the new freedom.\nShapiro emphasized the announcement effects of the recent \r\nPresidential actions: the wage-price freeze, \"the firmest form of \r\njawboning,\" would help to break inflationary expectations, inducing \r\nmore consumption out of a given level of spendable income; the tax \r\nreductions and import tax will stimulate auto sales and business \r\nfixed investment, while discouraging imports; and the suspension of \r\nconvertibility is \"a measure of our earnestness\" that this \r\nAdministration is tired of debating the adjustment process and \r\nreform must occur in September. He anticipated that the dollar will \r\nopen at a discount but will recover and that some form of wage-price \r\nregulations must persist through the summer of 1972. The new \r\nstimulus reconfirmed Shapiro's earlier view that the Federal Reserve \r\ncan move toward a 6 percent growth rate in the money supply.\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/1971/1971-08-kc

"Beige Book Report: Kansas City\nAugust 18, 1971\nIn the Tenth District, concern remains high over the pace of \r\ninflation and the near-term prospects for any improvement, based on \r\na telephone survey of a number of purchasing managers. Respondents \r\nexpressed a sense of frustration at current policies to deal with \r\ninflation, but most were ambivalent at the usefulness or \r\ndesirability of an approach involving controls.* In contrast, the \r\nagricultural sector was marked by increased concern over the \r\nlikelihood of declining farm prices in the months ahead.\nThe moderate improvement in District economic activity reported in \r\nthe last Red Book continues to be confirmed by reports from \r\ndirectors and District bankers, although business loan demand has \r\nweakened further. At the same time, some loss of strength in deposit \r\nflows has been noted in recent weeks and expectations of some \r\ndisintermediation are not uncommon.\nA telephone survey of a sample of purchasing managers elicited the \r\nview that there had been little change in the pace of inflation. In \r\nfact, a few, such as relatively large users of steel and steel \r\nproducts and rubber users, indicated that there had been some \r\nquickening of the pace.\nOne firm, a large purchaser of chemicals, did report that, for the \r\nfirst time in several years, two successive quarters have gone by \r\nwith no renegotiation of prices on large annual contracts. However, \r\nother chemical purchasers indicated that there was no abatement in \r\nthe rate of price increases for chemicals. For these firms, most \r\nrecent increases in cost of materials stemmed primarily from higher \r\nfreight charges. A number of other firms also cited higher freight \r\ncharges as the principal reason for increased prices to them. Most \r\nof the purchasing managers queried said that their firms would try \r\nto pass higher materials costs on to consumers. However, one did \r\nindicate that they hoped to absorb some of the higher costs of \r\nmaterials by selling more high-margin items.\nIn the course of their remarks dealing with price trends, the \r\npurchasing managers expressed a sense of frustration at current \r\npolicies to deal with inflation. However, when asked about controls, \r\nmost were ambivalent at the usefulness or desirability of such an \r\napproach. Though one respondent said that he would favor a price \r\nfreeze and a strict review of all wages, and others were in favor of \r\nsome form of incomes policy, most purchasing managers were wary of \r\ncontrols. Their major objection was that any system of price-wage \r\ncontrols would undoubtedly require, in their opinion, a massive \r\naddition to government bureaucracy. Also, some indicated that past \r\nexperience illustrated that controls had loopholes and served only \r\nto postpone wage and price changes. Even among those who indicated \r\nthat they would not like to see wage and price controls used at this \r\ntime, there was little confidence expressed that present economic \r\npolicies would be able to contain or roll back inflationary forces.\nRecent developments in the agricultural sector of the economy tend \r\nto confirm earlier reports in the Red Book about the likelihood of \r\ndeclining farm prices in the months ahead. At the same time, farm \r\nequipment business in the District is reported as quite soft. The \r\nprospects for record production levels of corn, grain sorghum, and \r\nwheat point to a substantial drop in grain prices this fall. In this \r\nconnection, two directors referred to the fact that corn prices \r\nalready have fallen sharply. While such developments might serve to \r\ndim income prospects for crop farmers, lower feed costs would \r\nbenefit the livestock industry. With improved feeding margins, \r\nfeeder cattle prices may spurt upward by yearend. If this encourages \r\nproducers to carry their animals to heavier slaughter weights, and \r\nto expand breeding herds, slaughter prices may well fall somewhat \r\nbelow projected levels for next spring and the rest of 1972. Thus, \r\nin the year ahead, it is conceivable that farm prices could serve as \r\na source of stability in the overall wholesale price index.\nDeposit flows into Tenth District banks have not been as strong in \r\nrecent weeks as in the first half of the year. This is true both for \r\ndemand deposits and consumer-type time and savings deposits. \r\nHowever, net inflows of large CD's have strengthened somewhat at \r\nseveral banks. Larger banks (weekly reporting) in the Tenth District \r\nexperienced a net decline in consumer-type time and savings deposits \r\nin July, although those bankers contacted did not seem to feel that \r\nthe situation was as bad as might have been expected. The reason \r\nmost frequently cited for declining deposits was increased Treasury \r\nbill rates, although some also detected an increased tendency to \r\ndraw on savings to finance purchases. District bankers apparently \r\nare expecting some disintermediation to occur in the next few \r\nmonths. The contact at one large bank indicated that his bank has a \r\nlarge volume of consumer-type CD's maturing in September, and, under \r\ncertain conditions, they could experience a large outflow.\nResidential mortgage and construction loan activity at District \r\nbanks continues strong. In addition, consumer installment loans, \r\nsuch as for home remodeling purposes and for automobiles, are \r\nshowing further steady growth. Aside from residential construction \r\nloans, however, the commercial and industrial loan picture appears \r\nto be rather spotty. In fact, both recent data and discussions with \r\nDistrict bankers suggest that business loan demand may have weakened \r\nfurther in recent weeks.\n*The telephone survey of purchasing managers was conducted prior to \r\nPresident Nixon's August 15 speech on economic policy changes.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-08-mi

"Beige Book Report: Minneapolis\nAugust 18, 1971\nJudging from the responses of the directors, recent developments in \r\nthe steel and rail industries will lead to higher costs and prices \r\nfor goods coming into or produced in the District. The timing of \r\nthese cost and price increases will vary, with some already having \r\ntaken place and more to come between now and the end of the year. \r\nLabor demand throughout the District is still relatively weak, \r\nalthough a few directors thought that business activity was \r\ngenerally good. Consumer savings flows to District banks have slowed \r\ndown since midyear, and bankers are anticipating only minimal \r\nincreases over the next few months. Business loan demand is expected \r\nto follow normal patterns over the next several months.\nA number of directors were aware of price and cost increases that \r\nhad already been instituted as a result of the recently announced \r\nsteel price hike. An equipment dealer in Upper Michigan, following \r\nthe steel price rise, raised the price of fencing even though it had \r\nbeen purchased earlier this year. One Montana director said that a \r\nsteel fabricator in his area would try to raise prices on his \r\nproducts to pay the costs of holding excess inventories, but the \r\nfabricator was not sure that competition would permit the higher \r\nprices to hold.\nIn addition, price increases can be anticipated in a number of \r\nsteel-using products between now and the end of the year. One \r\ndirector stated that reinforcement steel prices had risen about 5 \r\npercent, but that he had adequate supplies to hold the price on his \r\nconcrete products until the end of the year. At that time, though, \r\nthe steel price increase along with a 10 percent announced price \r\nincrease for cement and higher wage costs would force him to take a \r\nlong, hard look at these prices.\nAnother director said that a heavy equipment manufacturer in his \r\narea had stockpiled enough steel earlier this year to last until \r\nDecember, at which time he would have to raise prices. Farm \r\nmachinery prices are also expected to rise early next year, \r\npartially because of the recent rise in steel prices, but also \r\nbecause the relatively strong farm income situation is leading to a \r\nstronger demand for machinery.\nDespite the rise in the District help-wanted advertising index, the \r\ndirectors of this Bank generally feel that the demand for labor has \r\nnot increased significantly over the last few months, and for the \r\nmost part, only seasonal hiring is taking place. A few directors \r\nfelt, however, that business activity was good in their areas. \r\nTourist traffic seems to be up throughout the District, and spending \r\nby farmers has improved because of the good crop prospects.\nSince midyear, consumer-type time and savings deposits at selected \r\nReserve city and country banks have been experiencing only seasonal \r\nor weak expansion in contrast to rapid increases earlier in the \r\nyear. The slowdown was attributed in part to an increasing awareness \r\nof alternative higher return investments on the part of savers, \r\nincreasing competition from government securities and higher \r\noffering rates at S&Ls in some parts of the District. \r\nExpectations are that changes in consumer savings and time deposits \r\nwill range from only minimal increases to moderate runoffs during \r\nthe next several weeks, with any significant declines occurring \r\ntoward year-end, if short-term rates continue to climb and if \r\nconsumer reluctance to spend continues to dissipate.\nBusiness loan demand is expected to follow its usual seasonal \r\nadvance during the next several months, and there are no sectors \r\nwhich stand out as being especially conducive to large-scale \r\nexpansion in the District. Areas mentioned as possible sources of \r\nmoderate strength were real estate, public utilities and interim \r\nnonresidential construction financing. Bankers are also expecting \r\nsome increase in loan demand for inventory replacements at both the \r\nwholesale and retail levels.\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/1971/1971-08-su

"Beige Book: National Summary\nAugust 18, 1971\nAccording to the Reserve banks' reports, the economic recovery still \r\nappears to be proceeding quite slowly in most districts, with the \r\nindustrial sector particularly sluggish. Strikes and strike-related \r\neffects have further dampened economic activity in some districts. \r\nThe slow pace of the expansion has not yet generated renewed \r\ninventory accumulation. Retail sales are rising in some districts, \r\nbut are slowing in others. The brightest spot continues to be \r\nresidential construction. No improvement was noted in the employment \r\nsituation. Prior to the President's imposition of the wage-price \r\nfreeze, the bank reports indicated no slackening in the pace of \r\ninflation. In the financial sector, all the banks reported that\r\nbusiness loan demand was slack and that flows into consumer savings \r\naccounts had slowed noticeably. Only three banks included reports on \r\nthe reactions in their districts to the President's new economic \r\npolicies. Initial reactions were highly favorable.\nDurable goods manufacturing appears to be the most sluggish sector. \r\nThe Boston, Richmond and Cleveland banks reported that new orders \r\nare weak in capital goods industries and backlogs are shrinking. The \r\nSt. Louis bank noted that while orders are quite low for steel and \r\ndurable goods manufacturers, nondurable goods producers are \r\noptimistic. A number of banks mentioned that suppliers to the \r\nconstruction industry were experiencing very good sales.\nThe construction sector is reported except New York. Nonresidential \r\nbuilding, as booming in all districts well as housing starts, was \r\nrobust in a number of districts. The San Francisco bank reported \r\nthat residential construction is providing the principal stimulus to \r\nthe district's economy. Heavy construction activity was cited as a \r\nmajor reason for low unemployment in several areas within the \r\nAtlanta district.\nHalf the banks reported that retail sales were rising in their \r\ndistricts. The San Francisco bank, however, noted that retail sales \r\nwere only holding steady and the Atlanta bank reported that sales \r\nhave moderated recently. In the New York district, retail sales \r\nvaried from trendless to slowing.\nThere does not appear to be any strengthening of inventory spending. \r\nThe Richmond bank reported a substantial increase in the number of \r\nmanufacturing firms decreasing inventories and that both trade and \r\nmanufacturing inventories were still at higher than desired levels. \r\nInventory cuts by industrial firms were also expected in the \r\nCleveland district. Sluggish retail sales were cited by the San \r\nFrancisco bank as restraining inventory investment. The St. Louis \r\nbank reported that steel producers expect steel inventories to be \r\nrun down over the next six months, depressing their production \r\nlevels. The Cleveland bank reported the beginning of coal \r\nstockpiling in anticipation of an October strike in the coal \r\nindustry.\nStrikes and strike-related effects were depressing economic activity \r\nin several districts. Coal mining areas in the Richmond district \r\nhave been hurt by the rail strike and the slowdown in the steel \r\nindustry. The copper strike is reported to have affected economic \r\nactivity in Maryland, Utah and Arizona. The San Francisco bank noted \r\nthat the rail strikes especially hurt shipments of agricultural \r\nproducts, while the dock strike is affecting a widening number of \r\nindustrial and agricultural producers in the twelfth district.\nNo improvement in the employment situation was noted by any of the \r\nReserve banks. The employment situation was described as unchanged \r\nby the Richmond, Dallas, and Chicago banks and as weak by the \r\nMinneapolis bank. The Chicago, Cleveland and New York banks reported \r\nhigh unemployment in steel producing areas, with layoffs continuing \r\nduring early August.\nContinued inflation at recent rates was mentioned by a number of \r\nbanks. The Atlanta and Dallas banks reported that retail prices were \r\nexpected to continue increasing at recent rates. A survey of \r\npurchasing managers by the Kansas City bank (made before the \r\nPresident's August 15 speech) found concern about the near-term \r\nprospects for any slowing in the rate of inflation. In the \r\nMinneapolis and Cleveland districts, concern was reported over the \r\ninflationary effects of the steel settlement and announced steel \r\nprice increases. The Minneapolis bank reported that a number of \r\nprice and cost increases have already been instituted as a result of \r\nthe steel price hikes.\nIn the financial sector, the demand for business loans was generally \r\nreported as sluggish. The Richmond, San Francisco and Chicago banks, \r\nhowever, reported either good or improving demand for business loans \r\nin sections of their districts. Most banks also reported a \r\nconsiderable slowing in the growth of time and savings deposits. \r\nFears of disintermediation were mentioned by the Kansas City, \r\nChicago and Atlanta banks.\nOnly a few banks contacted their respondents after the President's \r\nspeech. Philadelphia reported that directors, bankers and \r\nbusinessmen in the third district, while surprised at the magnitude \r\nof the policy changes, were overwhelmingly in favor of them. \r\nBusinessmen noted problems in implementing the wage-price freeze, \r\nbut their general mood was one of cooperation and optimism. Initial \r\nreaction in the Chicago district among bankers and businessmen was \r\nalso generally favorable. Only one bank director in the Boston \r\ndistrict was available for comment. He was very enthusiastic about \r\nthe new policies, although he noted some problems in implementation \r\nfor banks. As a result of the President's speech, the Boston bank's \r\nacademic respondents were generally encouraged by the prospects for \r\nbreaking inflationary expectations and achieving a more stable \r\ninternational monetary system.\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/1971/1971-08-ny

"Beige Book Report: New York\nAugust 18, 1971\nThe pessimism regarding the economic outlook that had been expressed \r\nby the directors of the New York Bank and of the Buffalo Branch last \r\nmonth was still evident, and perhaps intensified, this month (before \r\nthe Administration announced its new measures). In general, the \r\nassessment was for no significant change in consumer attitudes, \r\nwhile some directors believed there had been an actual scaling back \r\nof buying intentions; business inventory spending was not expected \r\nto strengthen in the near future; no noticeable improvement in labor \r\nmarket conditions was foreseen and most of the directors felt that a \r\ngeneral economic upturn would gain momentum later than had been \r\ngenerally expected.\nConcerning consumer spending, the Buffalo Branch directors viewed \r\nretail sales activity as relatively better than a year ago, but with \r\nno discernible trend either up or down. The New York Branch \r\ndirectors were somewhat more pessimistic. A director from Rochester \r\nhad had recent discussions with a cross section of New York City \r\ndepartment store executives, who reported a slowdown in consumer \r\nspending in recent weeks and were generally pessimistic regarding \r\nthe immediate future. The chairman of the board of a nationwide \r\nmanufacturing concern believed that consumers were exhibiting \r\ncaution and more selectivity regarding both price and quality, and \r\nsaw consumer reluctance showing up particularly in discretionary \r\nspending, such as that for travel. Other directors also thought \r\nthere had been a scaling back in consumer buying plans.\nOne director, the president of an upstate New York bank, commented \r\non construction activities. He referred to the recent experience, \r\nwhich he felt was fairly typical, of a general contractor in his \r\narea who builds schools, factories and other nonresidential \r\nstructures. This contractor, after many years of good business, now \r\nhad few orders, a development that the contractor attributed to high \r\nconstruction costs, particularly wages.\nWith respect to business inventory spending, several directors \r\nexpressed the opinion that such outlays would continue to be \r\nsluggish, largely because of more stringent inventory controls as \r\npart of cost-reduction programs.\nNo noticeable change in the unemployment picture was expected by the \r\nBuffalo Branch directors. They believed that layoffs in the steel \r\nindustry would offset employment increases in the auto industry and \r\nin seasonal construction.\nAll the Buffalo directors expressed concern about the expected \r\nfurther erosion of the steel industry's competitive position in both \r\nforeign and domestic markets as a result of the recent steel wage \r\nand price developments.\nRegarding this country's foreign trade in general, the Rochester \r\nmerchant who is on the New York board noted that sales of imported \r\ngoods have been increasing steadily. Another director expressed the \r\nopinion that the continued deterioration in this country's exports \r\nwas due chiefly to high prices resulting from high labor costs, \r\nwhile a third director found our recent adverse trade balance \r\nsurprising, since European countries were also experiencing a high \r\nrate of inflation.\nTo assess recent developments and expectations for the next two \r\nmonths, in commercial bank savings and consumer-type time deposits \r\nand in loan demands, nine District Banks were contacted August 11-13, five in New York and four out of town. The majority of the banks \r\nreported that the strong increase in their deposits in the first \r\nfive or six months of this year had been replaced by a \"slow \r\nattrition,\" and most of them expected the attrition to continue or \r\nthe rate of advance to flatten out. At a majority of the banks, \r\ndemand for commercial and industrial loans had been \"weak\" or \r\n\"lusterless\" recently, and the banks expected only seasonal \r\nfluctuations over the coming months.\nAs regards the general business outlook, all the directors, both of \r\nthe New York Bank and the Buffalo Branch, were relatively \r\npessimistic concerning near-term developments, with some directors \r\nnoting that they thought a strong upturn would take longer than they \r\nhad previously anticipated. Several directors expressed (before \r\nPresident Nixon's August 15 address) a lack of confidence in the \r\nAdministration's economic program.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-08-da

"Beige Book Report: Dallas\nAugust 18, 1971\nRespondents at a sample of retail stores in the Eleventh Federal \r\nReserve District expect business activity to pick up moderately over \r\nthe next six months. Relatively few, however, were even mildly \r\noptimistic about improvement in the employment picture in their \r\nareas for the near term. Recent sales at these stores were somewhat \r\ngreater than during the comparable period last year, with summer \r\nsales being greater than anticipated. Nevertheless, inventories are \r\nstill higher than this time last year and a little higher than some \r\nwould like. Virtually all indicated that wholesale prices for \r\ninventories, as well as retail prices they charge their customers, \r\nhave risen moderately over the last six months. Moreover, nearly all \r\nanticipate that both wholesale and retail prices of their goods will \r\nrise by about a like amount in the next six months.\nAbout two-thirds of the respondents reported that sales recently \r\nwere above those a year ago, with a few indicating that the increase \r\nhas been substantial. The increase was attributed by most to greater \r\ndemand, improved internal operations, and expanded facilities. On \r\nbalance, the importance of \"big ticket\" items and the most expensive \r\n\"top of the line\" items in total sales has not changed materially \r\nsince a year ago. At least at these outlets, the consumer apparently \r\nhas not become more economy-minded in past months.\nAll of the stores surveyed ran special summer sales. A little over \r\n60 percent indicated that the sales volume exceeded their \r\nexpectations and was greater than during the summer sales last year. \r\nMost respondents indicated that the number of items on sale and the \r\nprice reductions this year were comparable with those last year, \r\nalthough about 30 percent reported greater number of items and \r\nlarger price reductions in this year's sales.\nEven though sales have been up recently, almost 80 percent have \r\ninventories equal to or greater than those a year ago. Moreover, \r\njust more than a third of the respondents felt that their current \r\ninventory levels are a little too high. Nevertheless, all of the \r\nrespondents are planning to keep their inventories at present levels \r\nor actually increase them slightly over the next six months \r\n(exclusive of changes for seasonal reasons). A few pointed out, \r\nhowever, that anticipated increases in inventories will probably \r\nreflect higher prices rather than greater unit volume.\nRegarding price increases, nearly all of the respondents experienced \r\na moderate rise in wholesale prices of inventories over the last six \r\nmonths. Moreover, the majority indicated that salaries in their \r\nstores have risen from 5 to 10 percent during the last year; and, on \r\nbalance, the number of people employed has also risen over this \r\nperiod.\nIn light of these increased costs, almost 90 percent of the stores \r\nsurveyed have raised their retail prices in recent months. And in \r\nview of the near unanimous feeling that wholesale prices will \r\ncontinue to rise about as rapidly in the next six months as in the \r\nlast six months, most respondents are planning to increase retail \r\nprices of their goods moderately further in the near term.\nDistrict data continue to show a modest recovery in economic \r\nactivity. Total nonagricultural wage and salary employment in the \r\nDistrict states rose 0.2 percent in June above the May level. Most \r\nof the growth came in manufacturing\u2014an employment area that still \r\nlags behind year-ago levels. Car registrations in the four major \r\nreporting areas in Texas showed a sharp 21 percent gain for June and \r\nare running much stronger than a year ago. Similarly, department \r\nstore sales continue to show strength in consumer buying. The \r\nseasonally adjusted Texas industrial production index dropped \r\nslightly in June mainly due to a cut in crude production. Texas \r\ncrude production allowables were reduced to 66.2 percent for August,\r\nthe fourth consecutive month of such reductions. Recent rains have \r\nbroken the drought, and progress is being made in efforts to control \r\nthe outbreak of Venezuelan equine encephalomyelitis.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-08-ch

"Beige Book Report: Chicago\nAugust 18, 1971\nInitial reaction of Seventh District bankers and businessmen to the \r\nwage-price freeze and other actions and proposals of the \r\nAdministration announced on August 15 appears to have been generally \r\nfavorable. Producers of motor vehicles and business equipment are \r\nespecially pleased, mainly because of proposed tax changes. An \r\nacademic economist with a wide following, however, called the freeze \r\n\"cosmetic rather than therapeutic,\" but the more common reaction is \r\nthat the Nation's economic problems\u2014the wage-price spiral, \r\nunemployment, and the trade balance\u2014were not diminishing, and that \r\nstrong words and actions were needed. Sentiment is bolstered, \r\nperhaps only temporarily, by the thought that \"something is being \r\ndone.\"\nOpinions expressed by a group of economists representing major \r\nDistrict businesses and financial institutions at a recent meeting \r\nwere relatively optimistic. Increases of $100 billion in GNP were \r\nforeseen for 1972\u2014a rise of more than 9 percent from 1971, about 5 \r\npercent price and 4 1/2 percent real. Inventory building is expected \r\nto accelerate in the fourth quarter, and plant and equipment \r\nspending is expected to revive by mid-1972. Managers in the various \r\norganizations are generally more bearish than economists. Cautious \r\npolicies on capital expenditures, inventories, and hirings could \r\nchange if orders and profits improve.\nEmployment conditions appear to have stabilized in the District, \r\nexcept for the hard-hit steel producing areas. Layoffs in most areas \r\nare about balancing new hires. Workers of all types and skills are \r\nin ample supply throughout the region. Unemployment in the \r\nautomotive centers remains very high with no sign of early \r\nimprovement. Strike activity is much less evident than at any time \r\nthis year.\nRetailers appear to be fairly well pleased with recent sales volume. \r\nInventories are reported to be in good balance, and orders for some \r\nhousehold durables are said to be picking up.\nAlthough orders for most types of business equipment remain \r\ndepressed, trucks are selling well\u2014especially light and\nextra-heavy trucks. Demand for both construction and farm equipment is \r\nsignificantly ahead of last year. Foreign sales of these products \r\nare down, however, both in developed and in underdeveloped nations.\nOrders for steel are at very low levels currently. The drop in \r\norders and output is much steeper than in 1968, and greater in the \r\nChicago area than in the Nation, although steel consumption is up to \r\nexpectations. Large inventories, heavy imports still to come, the \r\nbelief that proposed price increases will be postponed, and the fact \r\nthat mills are not financing customer inventories (as in 1968) are \r\nsaid to be responsible. In contrast, Detroit area production is \r\nholding up well.\nChicago area steel mills have begun to recall some of the 30,000 \r\nworkers laid off in early August as primary operations, shut down \r\nfor the strike deadline, are reactivated. Monday, however, the mayor \r\nof Gary, Indiana (heavily dependent on steel) reported that his city \r\nhad a 30 percent unemployment rate\u2014far above the state labor \r\ndepartment estimates. The mayor wants federal help.\nHome building continues strong in the District. Analysts now expect \r\nalmost 1.9 million starts this year, and almost as many in 1972, if \r\nfederal programs are pushed. A major producer of building materials \r\nstates that three price increases have \"stuck\" this year. Factories \r\nof this firm are on three shifts, and customers have been placed on \r\nallocation.\nSales of industrial chemicals have picked up vigorously in recent \r\nmonths after a slow start earlier in the year. Prices of these \r\nchemicals have increased slightly, and further increases are \r\nexpected in 1972 as supplies tighten up. Chemical prices had \r\ndeclined sharply in the late 1960's.\nReports from the corn belt indicate that blight damage has not been \r\nsevere, and that a record harvest is anticipated.\nIf present trends \r\ncontinue, the corn crop will be largely out of danger in two to \r\nthree weeks. Business loan demand at commercial banks remains \r\nmoderate, but some banks have noted a recent improvement. The \r\ncommercial paper market is competing vigorously with banks to supply \r\nshort-term business funds. The volume of new corporate security \r\nissues is expected to continue to decline (except for utilities), \r\nbut most analysts think long-term interest rates will not fall \r\nsignificantly. Inflows of funds to passbook savings accounts have \r\nslowed, and some individuals are \"disintermediating\" again. Banks \r\nare having difficulty placing CD's of more than 90 days because \r\ninvestors wish to remain short.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-08-at

"Beige Book Report: Atlanta\nAugust 18, 1971\nThis report is based on three special surveys, all of which were \r\nconcluded prior to the President's speech of August 15. The surveys \r\nindicate that businessmen, bankers, and retailers expect slow growth \r\nand inflation in the coming months. The retail sales outlook is \r\nmediocre, partly because of uncertainty among consumers. A slowing \r\nin the growth of consumer time and savings deposits is expected to \r\ncontinue. Business loan demand is reported moderate, and no strong \r\nupswing is foreseen.\nIn the past few weeks, a survey was made of businessmen and bankers \r\nlocated in areas experiencing either high or low unemployment. \r\nBusinessmen located in areas experiencing high unemployment cite \r\ndefense and aerospace layoffs, sluggish manufacturing growth, poor \r\nconsumer sentiment, and rapidly growing labor forces as causes of \r\nhigh unemployment. In only one of the surveyed areas, Miami, did an \r\ninterviewee anticipate substantial improvement in economic \r\nconditions during the next few months. On the other hand, none of \r\nthose surveyed expect their economies to deteriorate further in the \r\nnear future. In Miami, a large increase in consumer liquidity was \r\nmentioned as the source of a potential consumer spending boom. A \r\nbanker in another high unemployment area, however, thought that it \r\nwould take a great turnaround in consumer sentiment to dislodge \r\nsavings.\nBusinessmen and bankers in low unemployment areas cite either \r\nconstruction booms or a stable economic base as a reason for low \r\nunemployment. In areas such as Jackson, Mississippi; Macon, Georgia; \r\nand Jacksonville, Florida, a surge in construction is leading strong \r\neconomic advances. Such stable employers as state governments and \r\nuniversities are cited as reasons for low unemployment in other \r\nareas. None of the interviewees from low unemployment areas foresee \r\nsignificant changes in the prosperous conditions of their local \r\neconomies during the next few months.\nA sampling of retailers indicates that sales increases have \r\nmoderated recently and that price markups continue. Only modest \r\nretail sales gains are anticipated for the fall. Inventories are \r\nreportedly \"on target.\" Price increases from suppliers continue but \r\nnot at an accelerating rate. Retail price increases are expected to \r\ncontinue at a brisk pace. As a result of the steel price increase, a \r\nrather large price increase is anticipated for appliances.\nBankers through the District are detecting a slight slowing in the \r\ngrowth of consumer time and savings deposits. The growth of 90-day \r\nmaturity deposits\u2014often called golden savings\u2014has held up better \r\nthan the growth of passbook savings and CD's. The slower growth of \r\nconsumer time deposits was mentioned as a reason for aggressive \r\nbidding for large negotiable CD's. One major bank in the District \r\nhas increased its negotiable CD's\u2014as a result of a concerted effort\u2014\r\nby more than 60 percent since May.\nBankers cannot agree upon the reasons for the slower growth in \r\nconsumer time deposits. Several bankers think it is because of the \r\nrise in market interest rates, especially as reflected in the AT&T \r\npreferred issue and the latest Treasury refunding. Other banks feel \r\nthat consumers are becoming increasingly aware of the higher rates \r\npaid by S&Ls. Others cannot explain the slower time deposits \r\ngrowth, only noting that the accumulation of consumer deposits in \r\nthe last year has been very large. Most of the banks interviewed \r\nexpect the slower growth in consumer time and savings deposits to \r\ncontinue. There are some fears of disintermediation, especially when \r\n5 3/4 percent, two-year CD's mature early next year. Banks in\r\nseveral areas are expecting time and savings deposits to be used to \r\npay private school tuition next month.\nNo substantial change in the strength of business loan demand is \r\nexpected in the next few months. One banker reports that businesses \r\nwould like to enter into term loans with seven-to-eight-year \r\nmaturities. This banker said he was reluctant to make such loans, \r\nbut when he did, the loans always contained a variable rate clause.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-08-ph

"Beige Book Report: Philadelphia\nAugust 18, 1971\nPresident Nixon's shift in economic policy has been well received by \r\ndirectors, bankers and businessmen in the Third District. Most \r\nhowever, expressed surprise at the comprehensiveness and magnitude \r\nof the policy changes. Some businessmen candidly admitted that the \r\nwage-price freeze will cause management problems they had not \r\nconsciously thought much about previously; nonetheless, the general \r\nmood appears to be one of \"cooperating\" rather than \"complaining.\"\nThe reaction to the President's speech has been overwhelmingly \r\nfavorable in the Third District. Typical of some of the responses \r\nare: \"Delighted to hear it,\" \"Best thing we have had so far,\" and \r\n\"Necessary.\" The general feeling is that the new policy actions will \r\ngo a long way towards restoring confidence in the economy. One large \r\nretailer said he believes consumers would be spending more because \r\nof the psychological uplift. A banker reported that his board of \r\ndirectors gave the \"go ahead\" to a new building in light of the \r\nPresident's actions. Several manufacturers indicated that the size \r\nof the proposed investment tax credit would cause them to review \r\ntheir capital spending plans. Another banker predicted that interest \r\nrates would go down because inflationary expectations will likely \r\nsubside.\nAlthough many people we contacted felt the President \"had to do \r\nsomething,\" few anticipated the extent and boldness of his actions. \r\nMost expected some additional stimulative measures from the fiscal \r\nside; but not including something like revocation of auto excise \r\ntaxes. Likewise, some form of wage-price restraint seemed probable \r\nto them, but not an\nall-out freeze. Also, the few who had had time \r\nto think about the floating dollar and excise tax on imports were \r\nstunned.\nSeveral executives, although previously advocating wage and price \r\nrestraints, said they really had not thought much about the \r\nmanagement headaches they would face in the event of a freeze. These \r\nproblems, they said, are now coming into sharper focus. But, despite \r\nthe confusion and headaches they believe lie ahead, the general mood \r\nis one of cooperation and optimism.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-08-cl

"Beige Book Report: Cleveland\nAugust 18, 1971\nThe general theme of the remarks of our directors at meetings of the \r\nCincinnati Branch board on August 9 and of the Cleveland board held \r\non August 12, was that there is strengthening in some areas of the \r\neconomy, but that the pace of activity in the industrial sector \r\ngenerally remains sluggish. Concern was expressed about the \r\npersistent inflationary pressures and about the effect that recent \r\nwage settlements can be expected to have on prices. Several \r\ndirectors reported that, in contrast to their domestic experience, \r\ndemand for their products in international markets has remained \r\nextremely strong.\nThe particular areas of strength cited by the directors were in housing-related glass products and auto-related products. Demand for \r\ntires has remained particularly strong for several months. One \r\ndirector noted some recent signs of strength in the firm's consumer-oriented products, and another director reported an increase in \r\nsales of glassware and plastic products at the retail level, \r\nreflecting the fact that retailers have completed their inventory \r\nreductions in recent months and are now buying from the company once \r\nagain. Another director commented that coal sales, which have been \r\ndepressed for several months, picked up recently as major coal users \r\nbegan some stockpiling in anticipation of a possible strike in that \r\nindustry (the union contract terminates on September 30). The \r\nconsensus of our directors was the demand for almost all kinds of \r\ncapital goods has remained sluggish, reflecting the lackluster \r\nperformance of the economy. Particular areas of weakness cited were \r\nmachine tools, computers, and railway equipment.\nThe directors remain seriously concerned about inflation and \r\ninflationary expectations, and particularly about the effects that \r\nthe settlement in the steel industry would have on prices, and about \r\nthe built-in inflationary effect that the cost-of-living escalators \r\nwill have in the future.\nResults of our August 16 survey of District manufacturers \r\ncorroborate the views of our industrial directors regarding the \r\nsluggish pace of manufacturing activity. On balance, firms are \r\nexperiencing no improvement in new orders, and they are still \r\nworking down their backlogs. Employment and hours are both being \r\nreduced. Inventory reduction is expected to be particularly heavy in \r\nAugust, as the largest percentage of firms since 1967 anticipate a \r\ncutback in stocks.\nThe steel industry, of course, is exerting a major dampening \r\ninfluence on the District's economy. Insured unemployment rose \r\nsharply during July with the District's rate up 0.7 of a percentage \r\npoint between the first and last weeks of the month (compared with a \r\n0.2 point rise in the nation). During the first two weeks of August, \r\nthe steel industry was continuing to lay off workers. Among the \r\nsteel industry economists we contacted, one expressed the belief \r\nthat unemployment in his industry is currently at its peak. But he \r\nadded that some workers are on vacation, and it is not known how \r\nmany could be placed on layoff status (thereby raising unemployment) \r\nwhen the vacations run out. Another steel industry economist thought \r\nthere would be further layoffs, especially among white collar \r\nworkers in the industry. Estimates of steel production in August \r\ncall for a seasonally adjusted decline (from the July level) ranging \r\nbetween 36 percent and 46 percent. One economist said August could \r\nbe the lowest shipping month for the industry, excluding strike \r\nyears, since 1939.\nOn the financial side, several banker-directors reported strong loan \r\ndemand in recent weeks. One director, associated with a large bank, \r\nreported that loan commitments were up considerably from a year ago, \r\nwith part of the increase in real estate and part in the commercial \r\nand industrial category. This director also pointed out that the \r\nincreased cost of funds to the banking system will keep upward \r\npressure on the prime rate for the near term.\nA telephone survey of large banks in the District revealed that most \r\nbanks have observed a more-than-seasonal slowdown in consumer-type \r\ntime and savings inflows. Bankers expect the rate of growth to slow \r\nslightly further. Most banks also expect little near-term \r\nimprovement from the year old sluggish condition of business loan \r\ndemand. Large loans to large customers are expected to remain flat, \r\nin part because of the expectation that funding of corporate debt \r\nwill continue. Some banks have had requests for increases in \r\ncontractual revolving lines of credit, apparently reflecting \r\nbusiness attempts to improve liquidity. But the banks did not expect \r\nthe increased credit lines to be drawn upon.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-08-ri

"Beige Book Report: Richmond\nAugust 18, 1971\nOur latest survey of businessmen and bankers suggests an extension \r\nof the recent moderate pace of business recovery, although the \r\nmanufacturing sector may have weakened slightly in the recent past. \r\nConstruction activity continues robust, bankers report strong loan \r\ndemand, and retail sales are apparently continuing the recent upward \r\ntrend. But manufacturing respondents indicate a sluggish pace of \r\nshipments, new orders, and backlogs. Little or no change is reported \r\nin the level of employment or of prices.\nSurvey responses indicate that District manufacturers have \r\nexperienced no change in the level of shipments since the last \r\nreporting period. The diffusion of responses suggests some decline \r\nin both new orders and backlogs. Also, there was a substantial \r\nincrease in the number of firms reporting a decline in inventories. \r\nNevertheless, manufacturers believe that current levels of \r\ninventories are high relative to desired levels. The rail strike and \r\nthe slowdown in the steel industry have apparently exerted a \r\ndampening effect on District industrial activity, especially in the \r\ncoal mining areas of West Virginia and Virginia. Also, a strike in \r\nthe copper industry closed down a large copper producing plant in \r\nMaryland.\nRespondents indicate further increases in retail sales. A majority \r\nof banking respondents reported that automobile sales had increased \r\nin their areas. Our latest survey, however, shows consumer loans \r\nrising at a somewhat slower pace than in June and early July. As in \r\nthe case of manufacturers, trade inventories are also considered \r\nlarger than desired.\nLittle change is evident in the District employment situation. The \r\nmajority of respondents reported that employment remained the same \r\nin their areas, and the number reporting decreases in employment was \r\napproximately equal to the number reporting increases. The survey \r\nindicates that District firms, especially the trades and services \r\ngroup, are still experiencing upward wage pressures.\nStrong demand for loans of all types is still apparent in the \r\nDistrict. The number of banking respondents reporting increased \r\ndemand for business and mortgage loans was larger than it was in the \r\nprevious survey. District bankers report some recent weakness in \r\nconsumer savings deposits but attribute this weakness entirely to \r\nseasonal factors.\nRespondents report continued strength in residential and \r\nnonresidential construction. Several mentioned specifically a \r\nsizable increase in construction of apartment buildings while others \r\nnoted that commercial and industrial construction was exercising a \r\nfavorable impact on business in a number of areas. Some areas are \r\nalso apparently benefiting from new interstate highway construction.\nDistrict cash receipts from farm marketings during \r\n January-May were \r\nthree percent below those a year earlier. Crop production prospects \r\non August 1 were generally higher than a year ago.\nThe banking community remains mildly optimistic regarding prospects \r\nfor the immediate future, although somewhat fewer respondents expect \r\nfurther improvement than was the case in our July survey. Generally, \r\nthe consensus among both bankers and other businessmen appears to be \r\nthat recovery will continue at the recent moderate pace.\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/1971/1971-08-sf

"Beige Book Report: San Francisco\nAugust 18, 1971\nBusiness activity in the Twelfth District has shown only modest \r\nexpansion in recent weeks, with rising residential construction \r\ncontinuing to provide the principal stimulus in the economy. This in \r\nturn leads to greater demand for the products of the lumber industry \r\non the Pacific coast. Consumer spending remains at a stable level \r\nbut is showing comparatively little growth. This characteristic of \r\nonly very slow growth at present also is reflected in the views \r\nobtained from bankers and businesses concerning current and \r\nprospective demand for business loans, although there are some \r\nregional differences in this regard.\nConstruction activity continues to be a source of strength in most \r\nparts of the District. Housing starts are higher in Seattle, \r\nPortland, and in the major markets of California. Bankers note an \r\naccompanying increase in the demand for real estate loans despite \r\nthe recent rise in mortgage rates. The only evidence of overbuilding \r\nreported involves\nmultiple-units. In southern California, for \r\nexample, some new apartment projects have been reduced. \r\nNonresidential building is showing a recovery, particularly in \r\ngovernment construction projects.\nThe continued expansion of housing has benefited other related \r\nindustries. The lumber industry in the Pacific Northwest is \r\ncontinuing to expand production. Construction suppliers report \r\nheavier sales and they are hiring more workers. One major hardware \r\nsupplier has increased its work force by 5 percent and put some of \r\nits plants on overtime.\nConsumer spending is steady rather than growing. In some areas, \r\nappliance sales are higher but there are other reports of sluggish \r\nsales activity. According to one director, June retail sales in \r\nCalifornia of one national chain are below average compared to its \r\nsales in the rest of the Nation. A major oil company reported that \r\nits gasoline sales in June were 4 percent below those of a year ago. \r\nHeavy advertising seems to be necessary to stimulate retail buying \r\nand, overall, the pressures to build up retail inventories are weak.\nStrikes have hindered the economic expansion. In particular, the \r\nrailroad strikes have caused problems to shippers, especially of \r\nagricultural products. Similarly, the copper strike had hurt \r\nactivity in Utah and Arizona. Of continuing concern is the dock \r\nstrike in Pacific coast ports. This strike is affecting a widening \r\nnumber of industries and agricultural producers throughout the \r\nDistrict.\nDirectors of our Head Office and Branches were asked to comment on \r\nthe current and prospective demand for business loans and a few \r\nadditional banks also were contacted in this regard. The predominant \r\nreply among bankers is that they expect business loan demand will \r\ncontinue to run at about its current rate in the next two months. \r\nCurrent demand is variously described as \"soft,\" \"weak,\" \"flat,\" and \r\nin some instances, \"moderately good\" to \"strong.\" Regional \r\ndifferences are apparent in the replies.\nCurrent and prospective demand is reported generally to be \r\n\"moderately good\" in Oregon, Utah, and Idaho where unemployment \r\nrates are lower than in some other areas of the Twelfth District. \r\nLumber production in Oregon is rising as a result of the increase in \r\nresidential construction and mills are stocking logs in preparation \r\nfor the winter season when logging operations are curtailed. Loans \r\nto food processors in that area are also larger than a year ago. In \r\nUtah, the strengthening in loan demand reflects a gradual expansion \r\nin the economy on a broad front.\nBankers in California and Washington are less optimistic with \r\nrespect to business loan demand, which reflects in part the \r\nrelatively higher levels of unemployment in those areas. Within \r\nCalifornia, there seems to be slightly more optimism in the Los \r\nAngeles area than in San Francisco. Two major banks headquartered in \r\nsouthern California reported that business loan demand is rising at \r\na moderate rate and probably will continue to do so in the next few \r\nweeks. Other banks in northern and southern California characterized \r\ntheir loan demand as stable or flat and reported little prospect of \r\nsignificant growth in the near future. In nearly all cases, banks \r\ndid not think that repayment of loans from the proceeds of \r\nflotations had been a significant factor in restraining the growth \r\nin their volume of business loans outstanding.\nThe reports from directors associated with nonbanking firms seem to \r\nsubstantiate the predominant view obtained from bankers that no \r\nsignificant upsurge in business loan demand is likely to occur in \r\nthe next few weeks. With the exception of one or two firms which \r\nplan some plant expansion that will be financed initially by bank \r\ncredit, the remaining enterprises do not foresee in the near future \r\nany change in their need for bank credit.\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/1971/1971-07-su

"Beige Book: National Summary\nJuly 21, 1971\nThe language used in the Reserve Bank reports, to summarize the \r\ncharacterizations of the current economic situation by their various \r\nsources of information, falls within a rather narrow range. The \r\npresent recovery is described as weak (Boston), sluggish \r\n(Cleveland), sustainable but sluggish (Philadelphia), and modest \r\n(Dallas); there is also an expression of renewed doubts about its \r\nstrength (New York). Economic activity is seen as continuing a \r\ngradual improvement (Richmond), expanding at a gradual rate (San \r\nFrancisco), showing moderate improvement (Kansas City), continuing \r\nmoderately upward (St. Louis), improving, with the outlook modestly \r\noptimistic (Atlanta), giving rise to expectations of a moderate \r\npickup (Dallas), and leading to the anticipation of marked gains by \r\nthe year's end (Chicago).\nThe major sources of such strength as is observed in the economy \r\ncontinue to be construction, especially residential construction, \r\nand, to a somewhat lesser extent, consumer spending. This statement \r\nappears to be true for nearly all Districts, although there are some \r\ndifferences of degree. Nearly all Banks emphasized the importance of \r\nretail sales or consumer spending in supporting the observed levels \r\nof economic activity in their Districts. However, the relative \r\nweakness of automobile sales was mentioned by three Banks-Boston, \r\nRichmond, and San Francisco-while Philadelphia, Cleveland, and St. \r\nLouis appeared relatively less bullish about retail sales and \r\nconsumer spending. The tourist trade was reported to be booming in \r\nNew England, strong in Florida, and off somewhat in New Jersey.\nMost of the Reserve Banks continue to mention the importance of \r\nstrong residential construction activity, with Atlanta describing \r\nconstruction as the \"leading sector\" in that District's improving \r\neconomic situation. Richmond notes that firms producing output \r\nrelated to housing and construction are doing well, and San \r\nFrancisco reports production and prices up in the timber and lumber \r\nindustries as a result of rising construction volume. Possible \r\nclouds on the horizon of continued construction growth are the \r\nmention of higher mortgage interest rates by several Banks, some \r\nconcern over possible overbuilding of multiple-dwelling units in \r\nsouthern California, and a report of some softening in occupancy \r\nrates in office space and apartments in the Chicago area.\nAmong those Banks referring to financial matters, there was fairly \r\ngeneral agreement on the strength of consumer installment loans and \r\nreal estate loans, but more limited reference to, and less agreement \r\non, business loan demand. Richmond referred to strong demand for \r\nloans of all kinds, including business loans, while Boston described \r\nbusiness loan demand as sluggish. San Francisco sees it as steady \r\noverall; Philadelphia, weak; and St. Louis, rising. Although lending \r\nvolume has not yet strengthened in Chicago, the large banks there \r\nreport having perceived the early signs of a pickup in business loan \r\ndemand.\nSeveral Banks-St. Louis, Chicago, and Cleveland-reported a slowing \r\nin the rate of inflow (and some runoff) of deposits into financial \r\ninstitutions. Deposit inflows continue strong in the Tenth District \r\nand in the Ninth District, outside Minneapolis-St. Paul.\nNot all Banks commented on the employment situation in their \r\nDistricts, although several did. Unemployment remains high in the \r\nFar West, with some further aerospace layoffs to come, but is \r\ndescribed as stabilized in the Cleveland District. Steel industry \r\nproduction cutbacks and layoffs are posing special problems in the \r\nChicago and Cleveland Districts, as are layoffs in automobile and \r\nordnance plants in the Kansas City and Atlanta Districts.\nThere was some expression of feeling that the potential steel strike \r\nwould be relatively short, if it occurred at all. Two longshoremen's \r\nstrikes-one now underway on the West Coast, the other a possibility \r\nto begin on October 1 along the Gulf Coast\u2014are both feared to be \r\nlengthy and serious in their adverse effects.\nThe demand for short-term farm loans has declined in the Ninth \r\nDistrict as farm income flows have improved. Improved farm income is \r\nalso expected in the Tenth District\u2014drought areas aside\u2014despite \r\nanticipated declines in farm prices. But the situation of \r\nagriculture in the Eleventh District, where the drought is centered, \r\nremains uncertain to critical over wide areas. Increased corn \r\nacreage in the Seventh District, along with the planting of some \r\nblight-resistant seed, is expected to produce a sizable corn crop \r\nand substantially lower prices for it.\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/1971/1971-07-sf

"Beige Book Report: San Francisco\nJuly 21, 1971\nEconomic activity is expanding at a gradual rate according to the \r\ndirectors of this bank's head office and branches. There are \r\nelements of both strength and weakness present. Construction and \r\nconsumer spending continue to expand but the manufacturing sectors \r\npresent a mixed picture. Labor disputes are causing some problems. \r\nBanks in general report both higher loan demand and rising deposits, \r\nand their experience is consistent with a view of overall expansion.\nConsumers are continuing to increase their spending at a gradual \r\nrate. Increases over last year in the 10 per cent range are typical. \r\nThis spending activity is not uniform, however. Automobile sales, \r\nfor example, are described both as spotty and as improving, \r\ndepending upon location.\nUnemployment remains high. Further layoffs are expected in \r\naerospace; Boeing expects to lay off an additional 8,000 to 9,000 \r\nworkers in the Seattle area this year. Manufacturing does not seem \r\nto be expanding fast enough to bring about marked reduction in \r\nunemployment. Domestic demand is not that strong and in some cases \r\nforeign competition is strong. For example, steel fabricators on the \r\nWest Coast are experiencing strong competition from imported steel. \r\nLabor disputes are also a factor in reducing output and demand. To \r\nobtain some supplemental information about trends in employment, our \r\ndirectors were asked to comment about recent and prospective changes \r\nin employment in their companies. Of the nonbank directors who \r\ncommented, two planned increased hiring two were still cutting back \r\non their work force; and five reported no change from current \r\nlevels. Of the bank directors who responded, only two said that they \r\nplanned some increases in their staff; two planned further \r\nreductions; and seven reported stable levels with little or no \r\nchange expected.\nLabor disputes are causing difficulties for some industries and \r\nareas. Strikes in the copper industry are adversely affecting \r\nArizona and Utah. There have been stoppages of various lengths in \r\nsome lumber mills and in the building trades. The strike which could \r\ncause the most disruption, if it continues, is that by longshoremen \r\nat West Coast ports. Industries exporting goods are being adversely \r\naffected and some unemployment already is reported as a consequence. \r\nThis strike is not expected to be settled quickly, and therefore its \r\neffect should continue to grow.\nConstruction remains a source of strength throughout the District, \r\ndespite recent increases in the cost of mortgage funds. Labor \r\ndisputes have caused some stoppages, but these have not been \r\nprolonged in most cases. Building permits and housing starts are \r\ncontinuing to rise. The pace of activity is causing concern in some \r\nareas, such as Southern California, about the possibility of \r\noverbuilding of multiple units. One consequence of this rising \r\nconstruction volume has been a recovery of lumber and plywood \r\nprices, and greater production by the timber industry.\nConditions in District agriculture remain promising. Good prospects \r\nare reported for wheat and some fruit crops in Oregon, Washington, \r\nUtah, and Idaho. Eastern Washington did have a lighter apple crop \r\nthan expected, but cold storage facilities are still being expanded.\nBanks in most District states report higher levels of loan demand. \r\nReal estate loan demand in particular continues to be strong. \r\nBusiness loan demand appears to be more mixed, but overall it is \r\nsteady. In one case,\na bank reported that it is being more selective \r\nin making loans to national companies in order to meet local demand. \r\nDeposits are higher for most banks but interest rates also are \r\nhigher. Not only have rates on negotiable certificates of deposit \r\nrisen, but many banks have announced the restoration of the rate on \r\npassbook savings accounts to 4 1/2 per cent, effective\nAugust 1.\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/1971/1971-07-ny

"Beige Book Report: New York\nJuly 21, 1971\nThe opinions expressed recently by Second District Federal Reserve \r\nBank directors seemed to reflect some renewed doubts regarding the \r\nstrength of the economic recovery. \r\nThe directors in general foresaw \r\nno near-term improvement in the unemployment picture\u2014indeed a few \r\nexpected further weakening\u2014and some felt that additional disruptive \r\nstrikes were in the offing. On the other hand, the outlook for \r\nconsumer spending and residential construction remains good; no \r\nsignificant changes in the trends in these sectors were thought to \r\nhave occurred in the recent past. Most of the directors felt that a \r\nwidespread lack of confidence among both businessmen and consumers \r\nis a major factor in the disappointingly slow rate of economic \r\nrecovery.\nConcerning the unemployment situation, the directors felt the \r\ncontinuing efforts of businessmen to cut back costs made it unlikely \r\nthat a significant reduction of unemployment would be achieved in \r\nthe coming months. The chairman of the board of a large New York \r\nCity bank said he expected that his firm would have a smaller staff \r\nat the end of 1971 than it had earlier in the year, and felt that \r\nother financial institutions-the city's strongest employers\u2014also \r\nwould not contribute much support for the local job market this \r\nyear. The president of a nationwide manufacturer of plumbing and \r\nrelated products felt that the wage-cost squeeze was forcing \r\nindustry to cut back on spending and employment. The Buffalo Branch \r\ndirectors agreed that labor markets in their locality generally \r\ncontinue to experience an oversupply of persons seeking a limited \r\nnumber of job openings, and said the permanent closing of some \r\nplants has aggravated the situation. Several directors also referred \r\nto the fiscal difficulties of state and local governments as a \r\nfactor inhibiting hiring by these bodies. One exception noted by an \r\nupstate manufacturer was that employment in the automotive parts \r\nindustry has been holding up well.\nThis rather dim unemployment picture, to some extent, conditioned \r\nthe directors' views with respect to potential labor strikes. Most \r\ndirectors agreed that further strikes could be expected, since labor \r\nleaders felt obliged to attempt to gain at least the same benefits \r\nfor their members that other unions have received in the recent \r\npast. This view was most forcefully advanced by the chairman of the \r\nboard of the large New York City bank and by the president of the \r\nplumbing concern. Upstate directors, on the other hand, tended to \r\nsee a reduction in labor disputes. Some of the Buffalo directors, \r\nfor example, felt that there would. be no steel strike because steel \r\nworkers were becoming aware of both the worsening competitive \r\nposition of U. S. steel in world markets and the fact that strike-hedge inventory-building by steel users would minimize the potential \r\nharm of a strike to the steel companies. Moreover, the other Buffalo \r\ndirectors who did believe a strike was in the offing thought it \r\nwould be a short one. All of the Buffalo directors felt that the \r\nsettlement would be somewhat less generous than that obtained in \r\nrecent other major industrial wage agreements, although most felt \r\nthat the settlement could not depart significantly from those \r\nrecently negotiated in the aluminum and can industries.\nThere seemed to be little change in recent weeks in the directors' \r\nassessments of the outlook for consumer spending and residential \r\nconstruction. Outlays for consumer goods were generally reported to \r\nbe running at a level well ahead of last year, but have not as yet \r\nreached \"boom\" proportions. In regard to residential construction, \r\nthe directors generally felt that activity in this sector was \r\nrunning at a satisfactory level, or would do so soon. The chairman \r\nof the board of a large Rochester department store noted that \r\npolitical problems \"sometimes interfere with low- and middle-income \r\nhousing.\" The president of an upstate bank felt. that home-building \r\nactivity in his area was strong, but would be stronger except for \r\nthe resistance of local officials to large projects, and the lack of \r\nadequate sewage, highway, and school facilities.\nMost of the Second District directors stressed the lack of \r\nconfidence among both business and consumers as a major factor \r\ninhibiting the economic recovery. This feeling was perhaps most \r\nforthrightly expressed by the vice president of Rochester's largest \r\nfirm, who said: \"businessmen and consumers had lost confidence in \r\nthe Government's ability to design and execute programs which would \r\nlead the economy back to health along with a reduction in the rate \r\nof inflation.\" He attributed this feeling in part to a \"lack of \r\ncredibility in the economic statistics and forecasts developed by \r\nthe Federal Government.\" Another upstate director described the \r\nsituation as a \"nationwide stagnation of enthusiasm.\"\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-07-at

"Beige Book Report: Atlanta\nJuly 21, 1971\nBusinessmen and bankers generally report improving economic \r\nconditions. The short-run outlook is modestly optimistic but, \r\nunderlying this, there remains some deep-seated concern about the \r\nfundamental health of the economy and the ability to control \r\ninflation. Construction continues to be the leading sector, although \r\ntwo large projects have been delayed and one canceled. Manufacturing \r\ncontinues to gradually increase, except for primary metals and \r\naerospace. Tourist trade is reported strong in several areas. A \r\nlengthy longshoremen's strike is expected to start on October 1.\nConstruction activity is reported to be strong in most areas of the \r\nDistrict. In Baton Rouge, residential construction is occurring at a \r\nrecord pace and two office buildings have been announced. A \r\nconstruction boom is continuing in Tampa, with shopping center \r\nconstruction leading the way. Residential construction is also \r\nreportedly leading an economic upturn in South Florida. Construction \r\nactivity is reported at a fast pace in most parts of Tennessee with \r\none businessman claiming that it is difficult to obtain bids from \r\ncontractors because of the high level of activity. A large \r\nrefrigerated warehouse has been announced for Atlanta. On the other \r\nhand, financing difficulties are blamed for delays in two large \r\nprojects, and another proposed project has been canceled. A \"new \r\ncity\" previously announced for Central Tennessee has been stalled by \r\nan inability to obtain adequate financing. Construction of the New \r\nOrleans domed stadium is being held up because there were no bids on \r\nthe stadium bonds. The bonds have been readvertised and bids, if \r\nany, will be opened on August 11. If the bonds sell on that date, \r\nconstruction will be delayed only three weeks. Any further delays in \r\nthe project could jeopardize the stadium as presently planned, \r\nbecause the Louisiana legislature has set a ceiling cost of $129.5 \r\nmillion for the stadium. A $100 million plus hotel-office complex \r\nplanned for downtown Atlanta has fallen through.\nManufacturing activity is reported to be improving. An auto parts \r\nproducer is reported operating near capacity as is a pleasure boat \r\nmanufacturer. Furniture producers report greater than anticipated \r\nsales. Farm machinery is also moving well, partly because of large \r\nexports. Primary metals and aerospace remain weak, however. The \r\naluminum industry has reportedly laid off 1, 200 in the past month. \r\nSteel production is considerably below capacity. A subcontractor for \r\nthe aircraft industry and an aerospace research firm have both laid \r\noff workers in Tennessee. Five hundred have been idled at an \r\nautomobile assembly plant in Atlanta, evidently because of switches \r\nin model mix and a return of normal production after the post-strike \r\nperiod.\nNew plant announcements continue at a modest pace. A plant to \r\nliquefy and store natural gas and a water meter manufacturing plant \r\nwill be built in South Alabama. A plant to manufacture gas heaters \r\nand air conditioners for recreational vehicles is planned for \r\nCentral Tennessee. A plant to manufacture mobile homes and another \r\nto manufacture wearing apparel have been announced for Tennessee.\nThe tourist season is reported to be strong in the mountain areas of \r\nTennessee and in most of Florida. Motels along Florida's north Gulf \r\nCoast are reportedly booked for the remainder of the summer. \r\nOccupancy rates along Florida's Gold Coast are high.\nOne New Orleans banker reports that he expects delinquencies to \r\nincrease slightly in the coming months. Collections remain a \r\nproblem, particularly because of bankruptcies. Also, a Tennessee \r\nbanker thinks that farmers are overextending their credit to buy \r\nmachinery in order to avoid farm labor difficulties.\nA longshoremen's strike is expected to start along the Gull Coast on \r\nOctober 1 and last for 60 to 75 days. The union is reportedly asking \r\nfor a one-year contract that would raise base pay from $4.50 to \r\n$7.50. Work over 30 hours would receive time and one-half, and six \r\nmore holidays are requested along with increased employment security \r\nbenefits.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-07-bo

"Beige Book Report: Boston\nJuly 21, 1971\nBusiness conditions continue to appear mixed, with indications of an \r\neconomic recovery weak. Business loan demand is sluggish, although \r\nfirms are asking for future commitments of funds. Consumer spending, \r\nother than on autos, appears to have picked up noticeably, but the \r\ndemand for industrial goods is either still depressed or just \r\nbeginning to show a slow improvement.\nMortgage interest rates are reported to have risen by a half \r\npercentage point in the last few weeks. Mortgage demand appears to \r\nbe primarily from the turnover of older homes, rather than from the \r\nsale of new homes. While business loan demand remains sluggish, it \r\nappears that firms are building up loan commitments to be assured of \r\nfuture credit. The banks noted that car sales\u2014both new and used\u2014are \r\nvery sluggish. One bank mentioned that a long-established Ford \r\ndealer switched to Toyota and is now a much happier and more \r\nprosperous businessman. One director, whose firm is a supplier to \r\nthe auto industry, cautioned that high auto inventories have created \r\na potentially dangerous situation in that industry.\nThere appears to be a mixed pattern in orders for industrial goods. \r\nBoth bank and business directors pointed out that the machine tool \r\nindustry is still very much in the doldrums, with order backlogs \r\nquite weak. This is attributed mainly to the slow pace of the \r\nrecovery, but imports are also playing a part in the lack of orders. \r\nIndustrial products are reported as continuing weak, with sales \r\nmodestly behind those in the first half of 1970. Orders for capital \r\nequipment for the chemical industry were mentioned as quite low. \r\nSome capital goods industries have seen an improvement. Orders for \r\nheavy engines, while moderate, were still better than anticipated. \r\nOne director mentioned that his aerospace division, including \r\nmilitary equipment, is now doing quite well. His military orders \r\nreflect a shift in composition back to a normal, pre-Vietnam mix. \r\nAnother director perceived a steady but not dramatic revival in \r\norders for his products from the paints, plastics, and paper \r\nindustries. One director, whose firm is a major steel user, said \r\nthat he could get through a 90-day strike with little difficulty, \r\nalthough he would probably experience some compositional problems. \r\nHe said that he had about 100 days' steel inventory on hand.\nThe tourist industry appears to be booming, with hotels fully \r\nbooked. While tourists are flocking to the lakes region of New \r\nHampshire and to the Cape, they appear not to be spending freely on \r\nconsumer goods. So while hotels are doing well, local shopkeepers \r\nare not. A director whose firm manufactures camping and boating \r\nequipment also noted that these sales have been excellent. Another \r\ndirector, whose firm manufactures a broad line of consumer goods, \r\nnoted that this is the one area which is showing modest strength.\nProfessor Samuelson was the only academic respondent available this \r\nmonth. He sees the economic situation as basically unchanged: the \r\nrecovery is weak and a 4 1/2 per cent inflation rate is the best we \r\ncan hope for this year. Because full employment cannot be attained \r\nuntil at least 1973, he said that a more expansionary fiscal policy \r\nwas needed and that the Fed should not worry about money supply \r\ngrowth rates in the 8-10 per cent range. Professor Samuelson \r\ncautioned against excessive preoccupation with money supply growth \r\nat the expense of letting interest rates shoot up. He explained the \r\nrecent rise in rates, accompanied by rapid growth in the money \r\nsupply, as an indication of current need for liquidity which he \r\nfeels the Fed can accommodate in the short run without having \r\ninflationary consequences.\nWhile conceding that rapid increases in the money supply create the \r\nrisk of igniting inflationary expectations, he feels we must take \r\nthis risk. He is in complete agreement with Chairman Burns that an \r\nincomes policy is needed. Professor Samuelson said the President \r\nmust change his stance of salutary neglect in the wage-price arenas.\nProfessor Samuelson has some doubts about current forecasts for \r\n1972. He feels that people are too confident that inventory \r\naccumulation will stay low through 1972. He believes that the fourth \r\nquarter will give us a good feel for how things are going.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-07-mi

"Beige Book Report: Minneapolis\nJuly 21, 1971\nJudging from the responses of the directors and branch directors of \r\nthis bank, consumer spending in the District has increased over the \r\nlast month. At the same time, savings flows to commercial banks are \r\nstill relatively strong, although there are indications that some \r\ntapering has occurred at reserve city banks. Unions in the District \r\ndo not seem to have tempered their wage demands in recently settled \r\nwage contracts or current bargaining sessions. The demand for \r\nagricultural loans seems to have abated over the past few months.\nRetail sales in various parts of the District seem to be \r\nstrengthening, and a few directors felt that retailers in their \r\nareas were optimistically looking at the future. Most responses were \r\nthat retail sales in June and early July were better than in May and \r\nconsiderably above a year ago; a number of directors were aware of \r\nJune sales by individual retailers in their areas which were more \r\nthan 15 per cent above a year ago. Those directors who felt that \r\nretail sales had not risen, particularly in Montana, were careful to \r\npoint out that retail sales in their areas were relatively strong in \r\nearlier months this year and therefore would not be expected to rise \r\ndramatically.\nThere appear to be divergent trends in various components of retail \r\nsales. Soft lines seem fairly strong, while consumers apparently are \r\nlimiting purchases of durable goods and luxury items.\nSavings patterns in the District seem to be diverging as well. With \r\none exception, savings flows to District banks outside the Twin \r\nCities continued as strong in June as in earlier months this year. \r\nThe one exception was in the Sioux Falls area, but the slowing, \r\naccording to one banker, was not really enough to mention. Savings \r\nflows to reserve city banks have slowed, however. One director noted \r\na savings run-off at a reserve city bank following the July 1 \r\ninterest crediting period and inflows during early July which were a \r\nlittle slower than in previous months.\nWith a number of major labor contracts currently being negotiated in \r\nthe District, it does not appear that union wage demands have eased. \r\nIn upper Michigan, the contract between the White Pine Copper \r\nCompany and the United Steelworkers is scheduled to expire at the \r\nend of July, and negotiations began earlier this month. It was not \r\npossible to learn what terms are being considered, as neither \r\nnegotiating team was willing to divulge this information. In the \r\nTwin Cities, a strike by sand and gravel haulers, which began during \r\nthe first weekend in June, seriously curtailed construction activity \r\nuntil early this week. The union asked for an increase of $3.00 per \r\nhour over the next three years, but was content to settle for $2.75 \r\nover the three-year contract period. 'This was essentially the same \r\nsize of settlement that other construction unions have won over the \r\npast two years.\nThe Anaconda Company, with a Montana employment in excess of 6,000, \r\nwas struck on July 1, but the directors from that area were \r\noptimistic about the duration of the strike. The company has offered \r\na 32 per cent increase in wages and fringes over the next three \r\nyears, but this was rejected by the union. Although it was not \r\npossible to determine the counter offer, the directors felt that \r\nunsettled issues were more concerned with work rules and \r\nproductivity problems than with the size of the offered wage \r\nincreases.\nPartially reacting to the high rate of unemployment in the area, \r\nunions in the La Crosse, Wisconsin, area seem to have lowered their \r\nsights somewhat and have been accepting contracts calling for wage \r\nincreases of about 6 per cent. This philosophy has not permeated the \r\nconstruction industry, however, where laborers and carpenters are \r\ncurrently striking for a 12 per cent pay increase.\nDemand for agricultural loans at banks in the Ninth Federal Reserve \r\nDistrict has moderated somewhat in recent months, according to our \r\nlatest agricultural credit conditions survey. This phenomenon has \r\noccurred as a result of the improved flow of farm income during the \r\nsecond quarter which lessened the strong need for short-term loans. \r\nOn the other hand, the demand for long-term, or real estate, loans \r\nhas increased because of a decline in long-term interest rates. \r\nThese declining rates have been particularly effective in \r\nencouraging more loan requests due to the backlog of farmers' long-term spending plans.\nBankers seem to expect that the overall farm credit demand will \r\ncontinue somewhat lower. These anticipations reflect both the \r\nrecently improved farm income situation and the expectation that \r\nfarm incomes will continue to improve. Some respondents expressed \r\ncaution in this outlook, however, pointing out that higher incomes \r\nwere the result of currently high prices for several important farm \r\nproducts, and that it was very possible that these prices could fall \r\nover the next few 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/1971/1971-07-ph

"Beige Book Report: Philadelphia\nJuly 21, 1971\nThe general consensus in the Third District is that the economy is \r\nin the midst of a sustainable but sluggish recovery. Manufacturers \r\nreport some slippage of activity in July, but look for a pickup in \r\nAugust. Their capital spending plans remain essentially flat, and \r\nthey foresee little stockbuilding until late this year or early next \r\nyear. Consumer activity is mixed, with department store sales \r\ntrending upwards but vacation spending apparently off from a year \r\nago. Bankers report weak loan demand and cost pressures. Thrift \r\ninstitutions in Philadelphia experienced a sharp increase in \r\nmortgage repayments during June, particularly for older, lower rate \r\nmortgages.\nManufacturing activity in the Third District shows signs of \r\nweakening some in July. Our latest polling of District manufacturers \r\nindicates that more of them are experiencing decreases in sales and \r\nnew orders than are realizing increases. The consensus, however, is \r\nthat this setback is only temporary, and that shipments and orders \r\nwill rebound in August. According to directors the weakness in \r\nmanufacturing stems from a slippage in industrial demand and \r\n\"zipless\" consumer demand.\nOur survey of manufacturing firms also indicates that the business \r\nexpansion now underway will receive little help from capital \r\nspending. Most of the firms canvassed plan \"no change\" in outlays \r\nfor plant and equipment for the rest of 1971. As for inventory \r\naccumulation, area firms on balance plan to add little if anything \r\nto their stocks through the summer months. Looking ahead six months, \r\nthough, about 40 per cent of the firms contacted say they will be \r\nincreasing inventories, compared to 20 per cent who plan decreases. \r\nThe remaining firms look for \"no change\" from their present stock \r\nlevels during the next half year.\nRetailers in the Philadelphia area seem a little more confident \r\nabout the outlook for consumer sales. Area department stores report \r\na pickup in sales for June and they are hopeful this increase will \r\ncarry forward into the second half of the year. Shoppers, however, \r\ncontinue to be price-conscious. Local retailers indicate, for \r\nexample, that in the home appliance and hardware departments lower \r\npriced items are moving but the higher priced lines are selling \r\nslowly.\nIn another sector of consumption, resort business along the New \r\nJersey shore is off from last year. A director from the shore area \r\nreports that, while weekend business is holding up, restaurant and \r\nmotel business Monday through Friday is down substantially from last \r\nyear despite excellent weather.\nBankers report that business loan demand is \"blah.\" Consumer loan \r\ndemand has improved but is a long way from being strong. One bank \r\npresident expressed disappointment at the small gains from his \r\nbank's promotional campaign to stimulate consumer loans. In \r\naddition, bankers report competition is stiff for certificates of \r\ndeposit. They also say cost pressures are great and bank profits \r\nwill continue to be poor. Bankers further indicate that the quality \r\nof their loan portfolios is still a big problem, and a great deal of \r\neffort is being directed at easing the situation.\nSeveral large thrift institutions in Philadelphia report sharp \r\nincreases in the amount of mortgage repayments during June. These \r\nrepayments are for hundreds of mortgages around the country \r\nprocessed through mortgage service companies. For the most part, \r\nthese repayments are for older, low rate mortgages. One thrift \r\ninstitution president speculates that \"savings balances are high and \r\npeople just want to get out from under any debt obligation, even a \r\nlow interest rate mortgage.\"\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-07-ri

"Beige Book Report: Richmond\nJuly 21, 1971\nAccording to reports from businessmen and bankers, no important \r\nchanges have occurred in the Fifth District economy during the last \r\nthree weeks. In general, the gradual improvement in economic \r\nactivity which began some months ago appears to be continuing. \r\nBankers report continuing strong demand for all types of loans, and \r\nretail sales are reported as rising, although there appears to be \r\nsome slackening in automobile sales. The District employment \r\nsituation remains unchanged.\nDistrict manufacturers report that the volume of new orders \r\ncontinued the upward trend which began in January of this year. \r\nShipments, backlogs of orders, and inventories were little changed \r\nfrom the previous reporting period. Furniture manufacturers again \r\nreported declines in the volume of new orders and backlogs of \r\norders, and increases in inventories. Firms producing products \r\nrelated to housing and construction continue to report upward \r\nmovement in shipments, volume of new orders, and backlogs of orders.\nSurvey results indicate that retail sales of goods and services \r\nimproved further during the past three weeks, but the number of \r\nbanking respondents reporting increases in automobile sales in their \r\nareas declined. The picture on changes in inventories since the last \r\nsurvey is mixed; however, a majority of respondents in manufacturing \r\nand trades and services believe that current inventory levels are \r\ntoo high relative to desired levels.\nThe District employment situation apparently remains about the same. \r\nIn general, respondents indicated that there were no major changes \r\nin employment or hours worked per week since the last survey. A \r\nnumber of respondents, however, reported increases in wages paid. \r\nUpward wage pressure appears to be most prevalent in the trades and \r\nservices area, with all but one respondent in this group reporting \r\nincreases in wages paid.\nNo important changes in the pattern of prices received were reported \r\nby manufacturing or trades and services respondents.\nResidential and nonresidential construction apparently continues to \r\nadvance in the District. The majority of the banking respondents in \r\nthe major cities of the District indicate a continuing surge of \r\nresidential building. Bankers also report on balance that \r\nnonresidential construction activity is strong in their areas.\nBanking respondents indicate that demand for business, consumer, and \r\nmortgage loans continues strong. There was a sharp increase in the \r\nnumber of respondents reporting an increase in business loan demand. \r\nWhile no banking respondent reported a decrease in mortgage loan \r\ndemand, the number reporting mortgage loan demand up declined from \r\nthe previous period.\nDistrict agricultural crop prospects on July 1 were generally good \r\nto excellent, although only fair prospects were reported in some \r\nparts of the District.\nIn general, respondents appear to remain cautious in their outlook \r\nfor the District economy. Comments received from reporters indicate \r\nconcern over the persistence of inflation and unemployment. The \r\nmajority of banking respondents believe economic activity in their \r\nareas will increase in the near future, but there was a decline from \r\nthe previous survey in the number reporting a probable increase.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-07-ch

"Beige Book Report: Chicago\nJuly 21, 1971\nObservers in the Seventh District report the rebound from the \r\neconomy's low point as slower and less vigorous than anticipated. \r\nConfidence remains, however, that an uptrend is under way and that \r\nthe fourth quarter and early 1972 will see marked gains in real \r\ngrowth and activity. Price expectations are bearish, however. Little \r\nindication is seen of slowing in the rate of price advance and some \r\nexpect acceleration toward yearend.\r\n\r\nThe business economists present at the regular monthly meeting held \r\nhere on July 14 continue to expect improvement in activity during \r\ncoming months, particularly toward yearend and into 1972. Thus far, \r\nhowever, the economy's performance has lagged behind the pace \r\nexpected earlier. The inflow of new orders has been sluggish-utility \r\nbusiness and orders for pollution-control devices are exceptions-and \r\nprofits have been under pressure; cost-cutting efforts continue to \r\nbe pushed vigorously. Steel is in the doldrums. Scattered layoffs \r\nhave occurred in advance of the strike deadline date. Users' \r\ninventory reductions are proceeding; Detroit's largest user is \r\nexpected to complete its steel inventory rundown by mid-November. \r\nFixed investment outlays are being held down to a replacement level \r\n(the utilities industry was not represented at the meeting).\r\n\r\nRepresentatives of the large loop banks reported early signs of a \r\npickup in business loan demand. Inquiries on the availability of \r\nterm loans and revolving credit arrangements have grown more \r\nnumerous, but lending volume has not yet strengthened. Savings \r\ninflows are down from earlier in 1971. Runoffs in large certificates \r\nof deposit have been increasing recently.\r\n\r\nThe major retail chains report a sharp pickup in sales during June, \r\nwith gains over the year-earlier month in the 9-12 per cent range \r\nfor three of the leading firms. Another bright spot, locally, is \r\nreal estate, with a volume of sales recently of boom proportions. \r\nSeveral of those present expressed dismay over price prospects. \r\nConfidence that the inflationary thrust would weaken later this year \r\nseemed to have dissipated altogether (the second quarter GNP and \r\ndeflator readings had not yet been released).\r\n\r\nA director of the bank who is closely identified with real estate \r\nconfirms the indications of continued strength in both sales of new \r\nand existing homes and home-building activity in the Chicago area, \r\nwhile viewing with much concern the implications of FHA's adherence \r\nto the present 7 per cent ceiling on contract rates. Loan discounts \r\nrunning from 7 to as many as 10 points are substantially raising, \r\nsometimes even doubling, developers' equities in new income \r\nproperties (commercial buildings and multi-family housing). This \r\ncould become a strong deterrent to construction in a market that \r\nalready has shown signs of tapering off, under the impact of some \r\nsoftening in occupancy rates in office space, high-rise luxury \r\napartments, and suburban walk-up apartments.\r\n\r\nFarmland values in many parts of the Seventh District have \r\nstrengthened from a year ago-particularly during the past three \r\nmonths. Overall average values for the District, according to a July \r\n1 survey of rural bankers, rose more than 2 per cent from first \r\nquarter levels and were about 3 per cent above year-ago levels. \r\nAlthough the year-to-year increase is small historically, it \r\nrepresents a marked recovery from the sluggish farmland market of \r\n1970. Greater availability of mortgage funds and accompanying lower \r\ninterest rates have likely boosted demand for farmland. High corn \r\nand soybean prices have also likely created buying enthusiasm.\r\n\r\nCorn acreage is up substantially from last year, according to the \r\nofficial July 1 crop report. Acreage to be harvested for grain was \r\nestimated at 64.5 million acres -12 per cent above a year ago and \r\nover 6 per cent larger than in the bumper crop year of 1967, when \r\n60. 5 million acres were harvested.\r\n\r\nLeaf blight disease has been discovered in varying degrees \r\nthroughout most corn-producing states. But, unlike last year when \r\nvirtually all of the crop was susceptible to the disease, nearly 30 \r\nper cent of this year's crop was planted with blight-resistant seed. \r\nAnother 30 per cent was planted with varying blends of resistant and \r\nsusceptible seed. Thus, between 30 and 45 per cent of the crop is \r\nresistant to blight.\r\n\r\nA precipitous drop in cash prices for corn does not appear imminent \r\ndue to the current low level of corn supplies-carryover stocks are \r\nexpected to be one-third smaller this fall-and uncertainty about the \r\nfinal size of this year's crop. If present production prospects \r\nbecome a reality, however, corn prices will be substantially below \r\ncurrent levels by late 1971.\r\n\r\nConversations with contacts at major commercial banks in Chicago did \r\nnot reveal any significant change in credit demands over the past \r\nmonth. Business loans appear to be still falling somewhat short of \r\nprojections based on normal seasonal patterns, but by less than a \r\nfew months ago. No further increase in the prime rate appears to be \r\nexpected until possibly well into next year. There was a general \r\npessimism about the pace of economic recovery, but part of this \r\nappeared to be a reaction to the recently published second quarter \r\nGNP figures and revisions for earlier periods.\r\n\r\nConcern was again expressed about what has happened to savings \r\ninflows, especially in passbooks. One large bank thinks some \r\ndisintermediation is again taking place, but is puzzled over where \r\nthe funds are going. They have lifted all restrictions on terms \r\noffered on consumer deposits (within ceiling requirements) and are \r\naggressively trying to compete for consumer funds.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-07-cl

"Beige Book Report: Cleveland\nJuly 21, 1971\nThe pace of the recovery in the District remains sluggish. \r\nParticular areas of strength\u2014as indicated by specific reports \r\nreceived in June\u2014were certain types of office equipment, certain \r\nconsumer goods and replacement tires. As a general matter, business \r\nactivity in June was below the previous expectations of most of the \r\nmajor manufacturing firms in the District, and no particular \r\nstrength is anticipated in July. The employment situation has not \r\nimproved in recent months, but at least unemployment has stabilized \r\nsince mid-June, following upward tendencies in May and early June. \r\nThe steel industry, however, is exerting more of a retarding \r\ninfluence on the District's economy, as evidenced by production \r\ncutbacks and spreading layoffs.\nOur most recent survey of manufacturers indicates a noticeable \r\nslackening in the upward pace of District manufacturing activity \r\nduring June. There were significant declines in the diffusion \r\nindexes for new orders, shipments, and backlogs. Price increases, on \r\nthe other hand, were more pervasive. The per cent of firms that \r\nreported paying higher prices was the largest so far this year. \r\nAnticipation's for July include a virtual flattening in new orders \r\nand shipments, further reductions in backlogs and inventories, a \r\nsoftening in labor utilization, and no abatement in the recent pace \r\nof inflation.\nOur latest survey of capital spending plans indicates that major \r\nmanufacturing firms in the three largest metropolitan areas of the \r\nDistrict expect to spend less for new plant and equipment this year \r\nthan last year, while public utilities plan to exceed last year's \r\ncapital outlays.\nIn general, comments from our directors representing industrial \r\nconcerns confirmed the lack of strength in District business \r\nconditions. Two directors associated with office equipment \r\ncompanies, however, mentioned a recent pickup in their sales \r\n(considered by one firm to be a good coincident indicator of \r\neconomic activity). Other directors noted improved consumer business \r\nand very strong tire replacement business.\nOne particular item of interest that provides some additional \r\ninsight into the District's employment situation came from a \r\ndirector who is president of a large state university. His \r\ninstitution is having the largest summer school enrollment in years, \r\nreflecting the fact that students were discouraged in their \r\nattempts, or unable, to find work and therefore chose to remain in \r\nschool.\nOur steel industry economists informed us that the steel inventory \r\nbuildup by the end of July will be about one million tons larger \r\nthan it was in July 1968 (the month prior to the last labor contract \r\nexpiration). The inventory buildup during the spring, however, was \r\nlarger this year than in 1968, chiefly because of recent price \r\nincreases. On the other hand, steel shipments this month are \r\nexpected to be roughly two million tons lower than in July 1968. \r\nOrders for third quarter delivery are extremely depressed, \r\nparticularly for August. (During a contract expiration year, steel \r\nusers ordinarily place some orders on the books to be first in line \r\nfor delivery following a strike settlement.) One major steel company \r\ninterprets the sparsity of August orders as a sign that steel \r\nconsumers are not anticipating a strike. The steel economists noted \r\nthat a record level of steel imports and rising imports of steel-using products, such as cars and appliances, are dimming prospects \r\nfor any upturn in orders during the remainder of the year.\nEconomists from two major banks in Cleveland reported their banks \r\nhad begun to experience a runoff in deposits. One bank had a \r\n\"serious\" reduction in time and savings deposits recently, while the \r\nother bank had a marked slowdown in net savings inflows. One of our \r\nbanking directors (country bank) also mentioned a slowdown in all \r\ntypes of deposits in recent weeks.\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/1971/1971-07-sl

"Beige Book Report: St Louis\nJuly 21, 1971\nEconomic activity is continuing moderately upward in the Eighth \r\nDistrict according to a survey of leading businessmen. Retail and \r\nmanufacturing sales continued to expand in early July on a \r\nseasonally adjusted basis. Reflecting the rising demand for output, \r\nthe employment picture is beginning to show improvement. Some \r\nmanufacturers have begun reinstating production workers who were \r\nlaid off last fall. The flow of savings into financial agencies has \r\napparently decelerated in recent weeks from the very rapid rates of \r\nthe first half of the year. The uptrend in loan demand which began \r\nin mid-1970 continued through the early weeks of July. Construction \r\nactivity likewise continues upward.\nRetail sales at most major department stores in the District \r\ncontinued to rise in July, although gains were not reported for all \r\nmajor cities in the District. For example, leading St. Louis stores \r\nwhich experienced a sharp spurt in June sales have had a turnabout \r\nin early July. This loss, however, was more than offset by gains at \r\nLouisville, Memphis, and other parts of the District.\nLeading manufacturers continue to express cautious optimism. Orders \r\nare expanding moderately over a wide range of products, and midyear \r\nprofits are generally higher. Plastics, fibers, other organic \r\nchemicals, and automated equipment were mentioned as specific areas \r\nof expansion.\nFinancial agencies report some slowdown in the rate of savings \r\ninflows from the very rapid rates of early this year, as well as a \r\nlessening of the retention rate. Loan demand, however, continues to \r\nexpand. Part of the expansion, especially that of mortgage loans, \r\nreflects national rather than local conditions. The larger savings \r\nand loan associations in St. Louis report major purchases of out-of-District mortgages, but business and other bank loans which are \r\nprimarily local have also expanded at rising interest rates. \r\nMortgage loan rates on homes were reported to be one-fourth to one-half a percentage point above the level of three months ago.\nInvestment plans by manufacturing firms generally remain unchanged. \r\nPlant capacity is reported as adequate, but a local agency which \r\nprovides information to business about opportunities in the area \r\nreported a substantial pickup of inquiries about possible new \r\nlocations for investments. The major thrust of new investment, \r\naccording to one manufacturer, is toward greater automation of high \r\nlabor input activities.\nThe employment picture is beginning to show some slight improvement. \r\nNone of the businessmen interviewed reported major hiring plans. \r\nAll, however, are replacing those lost by attrition, and a few \r\nreport some recalls of laid-off workers. A check of numbers employed \r\nby major firms reveals that a low point in the total has been \r\nreached and that the uptrend has been fairly consistent since the \r\nturning point. Although St. Louis was placed on the \"substantial\" \r\nunemployment list in June, the local job market improved in July \r\naccording to the Missouri Division of Employment Security. \r\nUnemployment claims filed during the week ending June 9 were 1,300 \r\nless than a month earlier and 1, 400 less than a year ago.\nConstruction activity in the District generally continues upward, \r\ndespite some leveling off of residential construction in St. Louis. \r\nBoth residential and commercial construction elsewhere in the \r\nDistrict continue to expand.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-07-da

"Beige Book Report: Dallas\nJuly 21, 1971\nThe presidents of large District savings and loan associations \r\ngenerally expect economic activity to pick up moderately in their \r\nareas. They reported that increases in construction activity have \r\nbolstered the demand for mortgage loans in recent months. Moreover, \r\nthe greater amount of construction activity, and associated mortgage \r\ndemand, is expected to continue through yearend. They also indicated \r\nthat they have raised their lending rates recently and expect to \r\nraise them again before the year is out. The banking directors on \r\nthe boards of the Federal Reserve Bank of Dallas similarly expect \r\nlocal economic conditions to improve, but, in addition, they \r\nanticipate that the rate of inflation and interest rates will \r\nincrease over the next six months. They also feel loan demand will \r\nincrease over this period.\nThe presidents of savings and loan associations generally reported \r\nthe demand for mortgage credit in their areas to be somewhat \r\nstronger than three months ago. Most attributed this strength to an \r\nincrease in construction activity. But in spite of the number of new \r\nhouses constructed, no buildup of unsold houses has been apparent. \r\nAbout half of the respondents reported that the number of unsold \r\nhouses in their areas has remained about the same as three months \r\nago, and a third indicated a decline in the number of unsold houses \r\nin their areas. Moreover, it was felt that these trends in \r\nconstruction activity, housing sales, and demand for mortgage credit \r\nwill continue through the next six months.\nAt the respondent savings and loan associations, current lending \r\nrates on 80 per cent conventional home mortgages range from 7 1/2 to \r\n8 3/4 per cent, averaging slightly less than 8 per cent. Most, \r\nhowever, ask for points above these rates. About half of the \r\nrespondents reported that both their mortgage rates and the number \r\nof points they are asking are higher now than they were three months \r\nago. Most of the remaining half reported that their rates and points \r\nhave remained at about the same level as three months ago. The \r\noverwhelming majority reported no change in their minimum down-payment requirements or maximum maturities on mortgage loans \r\ncompared with three months ago. About\ntwo-thirds of the respondents \r\nfelt that rates on their 80 per cent conventional home mortgages \r\nwould be from 1/4 to 1 per cent higher at yearend than they are \r\ncurrently.\nSavings and loan association presidents indicated that they are \r\nhaving either about the same or slightly less difficulty obtaining \r\ninterim financing as they did three months ago. Most report that \r\nthey are paying about the same rate for these funds as they did at \r\nthat time.\nThe banking directors similarly expect the trend in economic \r\nactivity in their areas to improve moderately, particularly in \r\nconstruction, industrial goods, and petroleum. But they also \r\nanticipate that both long- and short-term interest rates, and the \r\nrate of increase in consumer prices, will rise moderately over the \r\nbalance of the year. Most banking directors feel that loan demand \r\nwill pick up in the next six months, particularly in the consumer \r\nand construction areas. But they are also looking for the demand for \r\nagricultural loans to moderate further.\nBanking directors were also questioned about demand for lines of \r\ncredit and their policies on certificates of deposit and purchases \r\nof municipal securities. Demands for lines of credit by their large \r\nbusiness customers have not changed much recently, although a few \r\nindicated these demands have risen. Most of the recent lines of \r\ncredit have been arranged on the basis of verbal agreements (no fees \r\nattached). Two-thirds of the respondents said that they have \r\nrecently changed their policies for purchasing municipal securities. \r\nOf those changing their policies, more than half are buying less, \r\nmainly to purchase more liquid securities or because they feel that \r\ninterest rates on municipals will increase. Those purchasing more \r\nmunicipals indicated they are picking up mostly shorter term issues. \r\nOnly about half of the directors' banks are seeking funds by issuing \r\nlong-term certificates of deposit and are paying from 5 to 5 7/8 per \r\ncent for six-month funds.\nDistrict data continue to indicate that a modest economic recovery \r\nis taking place in this region. Texas industrial production \r\ncontinues to increase slowly. Registrations of new cars in Dallas, \r\nFort Worth, Houston, and San Antonio in May were 7 per cent above \r\nthe level for May last year. Similarly, department store sales for \r\nthe four-week period ended July 10 were 6 per cent above the level \r\nfor the corresponding period a year ago. However, Texas dropped its \r\noil allowables 2.5 points to a level of 66.2 per cent for August in \r\nresponse to seasonal demand conditions. But the other District \r\nproducing states were able to keep their allowables unchanged.\nThe situation for District agriculture continues uncertain to \r\ncritical for several areas and enterprises because of drought. In \r\nsome localities cotton plantings may be lost, and many cattle herds \r\nhave been drastically cut back or totally eliminated due to feed \r\nshortages and lack of water. Most recently, the appearance of \r\nVenezuelan equine encephalomyelitis has plagued herds of horses.\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/1971/1971-07-kc

"Beige Book Report: Kansas City\nJuly 21, 1971\nEconomic activity in the Tenth District apparently is continuing to \r\nshow moderate improvement, but a high degree of variability prevails \r\nby region and sector of the economy. The ordnance, oil and gas \r\nexploration, aircraft production, and airline transportation \r\nindustries remain weak. However, much of the weakness in these areas \r\nis offset by improved activity in such other areas as construction, \r\nfood processing, and agriculture outside the drought area. Financial \r\nactivity reflects this variability in the economy. Residential \r\nmortgage and construction loan activity is generally strong, \r\nconsumer installment loans are showing steady growth, and commercial \r\nloan activity is spotty.\nA number of large Army ordnance plants are located in different \r\nparts of the District. Civilian employment in these plants has \r\ndeclined by roughly 43 per cent during the past six months. More \r\nlayoffs are expected in the coming months at two of four plants \r\ncontacted. Surprisingly, bankers in these areas report no marked \r\nlocal impact from the cutbacks to date. The employees, many of whom \r\nwere working to supplement family income, frequently left the labor \r\nforce upon termination of employment or were absorbed in other \r\nsectors of the economy where activity was expanding.\nThe General Motors Corporation laid off 900 employees\u2014about 25 per \r\ncent of total employment\u2014at their Chevrolet assembly plant in Kansas \r\nCity during the past week. They indicate that many of these \r\nemployees will not be hired back after model changeovers. When \r\nproduction starts on '72 models in late August, employment at the \r\nBuick, Oldsmobile, and Pontiac plant is expected to continue at \r\nnormal rates. The Ford assembly plant is not planning any permanent \r\nreductions in its labor force, but will lay off some employees \r\nduring the retooling period for the '72 models.\nAn executive for a large airline reported that domestic revenues \r\nwere not improved by the fare increases granted in recent months. \r\nThe impact of the higher fares has been offset by reduced passenger \r\ntravel.\nContrary to national trends, two steel mills in the District report \r\noperations are going ahead at full tilt. Strength in the \r\nconstruction industry has served to prop continued strong demand \r\nfrom these mills. Both report that activity in their particular \r\nplants is not as vulnerable to national trends as is that of many \r\nsteel mills.\nExcluding western Oklahoma and New Mexicowhere severe drought \r\ncontinues to prevail\u2014agricultural conditions in the remainder of the \r\nDistrict are excellent. Wheat production in the District will \r\nvirtually equal last year's levels, despite the drought in part of \r\nthe District and the reduced acreage planted. The condition of \r\nspring planted crops and ranges outside the drought area is \r\nexcellent, and production for the District is likely to surpass last \r\nyear's levels. Agricultural production for the Nation also is \r\nexpected to be substantially above last year's levels, so farm \r\nprices are likely to decline this fall. Despite the anticipated \r\ndecline in farm prices, farm income for the year as a whole is \r\nexpected to be above that of last year. In addition to larger \r\nproduction, farm prices are likely to average higher for this year \r\nas a whole than last year because grain prices are not likely to \r\ndecline substantially until later in the year, and livestock prices \r\nare expected to remain above the depressed levels of last fall and \r\nwinter.\nResidential mortgage and construction loan activity at District \r\nbanks continues strong. Consumer installment loans are showing \r\nfurther steady growth; and some bankers are expecting an \r\nacceleration in this category. The commercial and industrial loan \r\npicture, aside from residential construction loans, appears rather \r\nspotty, though a strong volume of loan commitments is widely \r\nreported.\nDistrict bankers generally feel that the prime rate increase to 6 \r\nper cent was fully justified by cost-of-funds considerations and the \r\ndemand for loans. They view the current rate structure as one they \r\ncan live with\u2014though not in great comfort. Deposit inflows continue \r\nstrong, but higher\nshort-term rates are causing some passbook \r\naccount holders to move to consumer certificates of deposit, and \r\nbanks are finding large certificates of deposit a little harder to \r\nobtain and hold. There is a widespread expectation that the prime \r\nrate will be at 6 1/2 per cent by yearend unless, as one respondent \r\npat it, the Fed \"opens the gates\" to restrain rates.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-06-mi

"Beige Book Report: Minneapolis\nJune 23, 1971\nAlthough directors of this bank have not experienced any significant \r\nincreases in wholesale prices in their businesses over the past \r\nmonth, they are not optimistic in expectations of future costs and \r\nprices. Capital spending plans among district businessmen, while \r\nstill relatively bearish, do not seem to have changed since the \r\nbeginning of the year. Retailers did not experience any significant \r\nrise in consumer spending in the past few weeks but are still \r\noptimistic in their sales forecasts. Meanwhile, tourist activity, \r\nwhich is beginning to expand seasonally, is expected to rise about 6 \r\nto 10 percent this year over last.\nContrary to what would be expected because of the significant rise \r\nin the wholesale price index during May, the directors of this bank \r\nwere generally unaware of any significant price changes in their \r\nbusinesses over the past month. Among industries with recent price \r\nincreases are packaging materials, wholesale groceries, \r\nconstruction, and raw materials used in manufacturing heavy \r\nequipment. A number of directors, however, were able to cite cases \r\nwhere prices had actually declined over the past month\u2014most notably, \r\nready-to-wear clothing and apparel industries. One director felt \r\nthat these recent reductions, primarily caused by an increase in \r\nforeign competition, were large enough so that retail clothing \r\nprices this summer will not be higher than they were last year. \r\nWholesale cattle prices also have slipped in the past few weeks.\nThe directors did not view these recent price reductions as \r\nindications of curtailment in inflation; the prevailing opinion \r\nstill seems to be that prices will continue to rise. In the \r\nconstruction industry, for example, increases in steel are expected \r\nlater on this summer, and another general round of price rises are \r\nanticipated after January 1 of next year. One director, who is the \r\npresident of a utilities firm, said that, \"purchasing agents, with \r\nfew exceptions, continue to think of rather large price increases as \r\na way of life. When anticipating future outlays, the big question is \r\nwhether to build in expected cost increases of 7 to 10 percent.\"\nManufacturers in the Ninth District apparently have not changed \r\ntheir expectations regarding capital spending plans. Investment \r\nthroughout the district is at a reduced level, but this is the \r\nresult of decisions made as early as 1969 and not because area \r\nbusinessmen have recently reduced their anticipations.\nConsumer spending has not changed in the past few weeks, although \r\nretailers continue to be optimistic. The directors felt that auto \r\nsales in the district were doing a little better than earlier in the \r\nyear, despite a tendency for consumers to buy lower-priced units. \r\nDepartment store sales also appear to have picked up, largely \r\nbecause of the recent changes in fashions.\nIt is still early in the season, yet tourist operators throughout \r\nthe district are already expecting an increase in summer tourist \r\ntravel. A number of directors have noticed a significant increase in \r\ncampers and trailers on the road, and advance reservations at \r\nresorts and motels suggest that tourist activity in the district \r\nwill rise about 6 to 10 percent this year.\nMortgage interest rates in the Twin Cities have become slightly more \r\nrestrictive in the past few weeks. Whereas government-insured \r\nmortgages in the Twin Cities were down to around 7 percent plus 2 \r\npoints to the seller as recently as a month ago, a minimum of 3 \r\npoints is now being charged to the seller. A number of lenders also \r\nhave raised conventional mortgage rates to 7 3/4 percent from the 7 \r\n1/2 percent which prevailed three weeks ago.\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/1971/1971-06-sl

"Beige Book Report: St Louis\nJune 23, 1971\nBusinessmen in the Eighth District indicate that the upward economic \r\ntrend of recent months is continuing and they are \"reasonably \r\noptimistic\" about business prospects for the rest of the year. \r\nHowever, many businessmen expressed concern that inflation will \r\ncontinue unabated. Retail and manufacturing sales, production, and \r\nconstruction continue their upward advance from the autumn trough. \r\nFinancial agencies are pessimistic as to loan demand, but report \r\nthat they must continue to pay high rates for funds in order to \r\nattract savings. The outlook for agriculture and related industries \r\nis more promising now that weather conditions have improved.\nRepresentatives of major retail outlets in the district report \r\ncontinuing increases in sales. Some feel that the recent rise in \r\nsales volume reflects a less apprehensive consumer attitude with \r\nrespect to the economy. None indicated a relaxation of the more \r\nstringent inventory policies initiated last year, despite their \r\nbelief that sales will continue to be strong through the fall.\nThe trend of manufacturing sales and production remains basically \r\nunchanged from last month. Manufacturing respondents indicate \r\nemployment is holding steady and foresee no significant increase in \r\nhirings in the near future. The machine tool business still has not \r\nrecovered from its recent slump.\nBusiness investment continues to rise slowly, and respondents \r\nindicate that investment this year will be slightly above last \r\nyear's dollar volume but less in real terms.\nBoth residential and industrial construction continue to expand \r\nthroughout the district. Construction in St. Louis county, the \r\nlargest county in the district, set a record in the first five \r\nmonths of this year, according to the public works director. Total \r\nconstruction in the first five months of this year reached $81 \r\nmillion, exceeding the previous record set in 1969 by $5 million and \r\nthe 1970 total by $26 million. Housing construction is likewise \r\nreported to be vigorous in other metropolitan areas of the district.\nLoan demand has apparently lagged behind other economic indicators \r\nin the Eighth District. The decline in business loan demand at \r\ncommercial banks, which began last December, seems to have ended. \r\nHowever, no substantial increase in commercial loan demand is \r\nexpected until the end of the third quarter. One respondent stated \r\nthat the prime rate is too low in light of the high rates paid on \r\ndeposits, and anticipates raising the prime rate in the near future.\nDespite the rise in construction, loanable funds at savings and loan \r\nassociations in the St. Louis area continue to be available with \r\nlittle change in interest rates. This is due to the extremely rapid \r\nflow of deposits into these institutions in recent months. One \r\nsavings and loan association official expressed concern about the \r\npossibility of higher market interest rates, which in view of the \r\nceiling on rates paid, may lead to a slower rate of growth in \r\ndeposits.\nThe outlook for agriculture and farm-related business has picked up \r\nin recent weeks. The earlier adverse weather conditions, which \r\nrequired many crops to be replanted, have generally improved, and \r\nfarmers are now more optimistic. Increased agri-business sales were \r\nreported. Herbicide sales were especially strong, in part reflecting \r\nincreased crop acreage.\nProgress of government efforts to curb inflation has been \r\ndisappointing to most respondents. They are concerned about recent \r\nlarge wage settlements which they feel set dangerous precedents for \r\nfuture wage negotiations. Many businessmen expressed concern about \r\nthe recent acceleration in the rate of growth of the money stock. \r\nOne respondent stated that this rapid growth of money will cause \r\ninflation to be an \"uncomfortable yoke for some time to come.\"\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-06-at

"Beige Book Report: Atlanta\nJune 23, 1971\nReports of leading businessmen and bankers indicate the recovery is \r\ncontinuing but at a slow pace. The outlook has turned mixed, after \r\nbeing optimistic. One Alabama businessman describes the economy of \r\nhis area as continuing a slow, barely perceptible growth. Another \r\nbusinessman reports growing uneasiness about the sluggishness of \r\nrecovery. Yet another speaks of a more confident atmosphere. \r\nAnnouncements of plant expansions continue, but a few plant closings \r\nand sizable layoffs have cropped up. Construction is strong, with \r\nsome exceptions.\nOn balance, there is little vigor in manufacturing. Some companies \r\nin Tennessee are reported to be operating on only a four-day week, \r\nand even then inventories are piling up. An Alabama industrialist \r\nreports that manufacturing is the \"weak spot\" in the Alabama \r\neconomy. A north Florida banker, who has been reporting strong \r\neconomic gains in his vicinity, now describes activity as being on a \r\nplateau.\nThere have been a number of layoffs and plant closings in recent \r\nweeks. Between 500 and 750 workers have been idled by an aluminum \r\ncompany, reportedly because of stockpiling before the recent labor \r\nnegotiations. A textile mill employing 1,000 in Alabama is scheduled \r\nto close, but an effort is underway to try to find a buyer to take \r\nover the operation. About 300 workers are being laid off in Alabama \r\nbecause a vending machine manufacturing operation is closing. A \r\nspinning plant in Georgia has idled 200 and is anticipating another \r\n200-man layoff, allegedly because of air pollution problems and \r\nforeign competition. An engineering firm in Tennessee is laying off \r\n120 workers because of reduced aerospace research and rising costs. \r\nOn the other hand, it has been reported that some firms that did not \r\nrecruit at the University of Tennessee in the spring are planning to \r\nreturn this fall.\nNew plant announcements have been slow but steady. They include an \r\nelectric motor plant in Mississippi, a carpet dyeing and finishing \r\nplant in Georgia, a mobile home plant in Georgia, a plant to \r\nmanufacture leisure wear in Tennessee, and three plants to separate \r\nsulfur from oil produced in Alabama and Florida. Several plant \r\nexpansions are occurring at a variety of businesses in Tennessee.\nOutside of manufacturing, there are signs of economic strength. \r\nSouth Florida tourist business is vigorous. Long distance calls and \r\ntelephone installations in Alabama are increasing strongly. Air \r\ntraffic has picked up in the Tampa area. Retail sales are generally \r\nreported good, with one merchant noting that consumers have started \r\nto charge more of their purchases, presumably an indication of \r\nincreased consumer confidence.\nConstruction activity is generally reported to be strong. Jackson, \r\nMississippi, for example, is experiencing a high level of activity, \r\nand two large motel complexes have been announced recently. A \r\nshortage of skilled labor is anticipated in that area. A large \r\nresidential and industrial complex has been announced for an area \r\nnortheast of Atlanta. The northern Gulf Coast of Florida is \r\nexperiencing a motel and condominium building boom. Residential \r\nconstruction is brisk in the Auburn, Alabama, area. Builders there \r\nare planning to construct speculative houses in the $23,000 to \r\n$27,000 class because they are moving much faster than homes in the \r\n$35,000 to $45,000 class. Another residential recreation project is \r\ngoing to be built on a lake in east central Alabama. A $15 million \r\ncondominium is planned for St. Petersburg. Counter to the generally \r\nfavorable construction news, condominiums are reported to be \r\noverbuilt in south Florida, and construction is reported to be at a \r\nvery low level in Lake Charles, Louisiana, where some announced \r\nprojects have not as yet commenced.\nTwo prominent businessmen report growing concern over the inability \r\nto lick inflation.\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/1971/1971-06-ny

"Beige Book Report: New York\nJune 23, 1971\nThe views expressed by the directors of this bank and the Buffalo \r\nbranch, as well as by some large retailers, point to a continuing \r\ngradual increase in consumer spending, but very cautious inventory \r\npolicies by businessmen. In general, most respondents looked for a \r\nslight easing in wage demands, but do not expect any marked change \r\nin the price picture. Opinions regarding the strength of the demand \r\nfor business loans indicated some strengthening on balance.\nWith respect to consumer spending, all the Second District directors \r\nand retailers who expressed an opinion on the subject felt the \r\nupward trend was continuing. A number of the respondents, however, \r\nadopted a relatively cautious attitude towards the strength of \r\nretail activity. Thus, the treasurer of a large nationwide chain of \r\nretail department stores specializing in softwear felt that much of \r\nthe rise in his firm's dollar volume reflected higher prices, with \r\nthe physical volume of sales running only moderately above last \r\nyear. He felt that official tabulations indicating increasing \r\nstrength in consumer spending were somewhat exaggerated, and \r\nreported that his firm as well as other retailers he had spoken to \r\nhad not as yet seen signs that consumer retail outlays were reaching \r\nsuch proportions. As a result, he felt that \"doubt was cast\" on some \r\nof the official statistics. Similarly, while the vice president of a \r\nlarge New York department store with branches in the suburbs \r\nreported a \"healthy\" rise in his firm's sales in dollar terms, he \r\nnoted that higher prices accounted for a good part of this increase. \r\nAll of the Buffalo branch directors detected a continuing upward \r\ntrend in retail activity, with a \"spurt\" in some areas related to \r\nseasonal factors. The New York bank directors, however, \r\ncharacterized the pick up in retail sales as \"moderate\" to \"slow\".\nAll of the respondents felt that businessmen were continuing to \r\npursue cautious policies toward increasing their inventories, and \r\nthat such building as was taking place was largely due to special \r\ncircumstances. The chairman of the board of a large manufacturing \r\nconcern reported that he knew of no company accumulating inventories \r\nwith speculative motives,\" but he thought that some accumulation was \r\ntaking place as the result of special factors, such as anticipations \r\nof strikes and environmental protection measures\u2014especially the \r\nspreading ban on phosphates and restrictions on the paper industry. \r\nThe vice president of Rochester's largest firm also reported that \r\nstrike-hedging purchases had resulted in a substantial increase in \r\ninventories at his firm. However, he also pointed to the trend among \r\nretailers to limit their inventories and to rely increasingly upon \r\nthe ready availability of adequate stocks from jobbers and \r\ndistributors. The retailers who were contacted indicated there had \r\nbeen a slight rise in their inventories in preparation for an \r\nexpected increase in sales activity later on in the year.\nThe views of the directors regarding business loan demand seemed to \r\nindicate some strengthening. Thus, the presidents of three upstate \r\nbanks and the chairman of a large nationwide manufacturing concern \r\nfelt that the demand for this type of loan had increased in recent \r\nweeks, and one pointed particularly to the strength in the mortgage \r\narea. And, while the chairman of the board of another upstate bank \r\nreported that his bank had not experienced any strengthening of loan \r\ndemand, he noted that business loans are not a major part of his \r\nportfolio.\nThe respondents all continued to voice concern over the wage and \r\nprice situation, although on balance the opinions expressed seemed \r\nslightly less pessimistic than a month ago. Thus, Buffalo branch \r\ndirectors reported some slowdown in the rate of wage increases, \r\nparticularly among nonunionized concerns, and felt this trend might \r\ncontinue for the balance of the year. On the other hand, no \r\nsignificant change in the rate of advance of prices was evident to \r\nany of the Buffalo directors. One of the two New York City \r\nmanufacturing executives on this bank's board saw inflation as \r\ncontinuing, but detected signs of an easing in wage increases. The \r\nother New York manufacturer saw a pattern of first-year wage \r\nincreases averaging about 10 percent \"less of a disaster\" than \r\nprevious increases, but \"still a disaster\" since he expected \r\nproductivity to rise by only 3 percent to 3 1/2 percent in most \r\nindustries.\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/1971/1971-06-ny

"Beige Book Report: New York\nJune 23, 1971\nThe views expressed by the directors of this bank and the Buffalo \r\nbranch, as well as by some large retailers, point to a continuing \r\ngradual increase in consumer spending, but very cautious inventory \r\npolicies by businessmen. In general, most respondents looked for a \r\nslight easing in wage demands, but do not expect any marked change \r\nin the price picture. Opinions regarding the strength of the demand \r\nfor business loans indicated some strengthening on balance.\nWith respect to consumer spending, all the Second District directors \r\nand retailers who expressed an opinion on the subject felt the \r\nupward trend was continuing. A number of the respondents, however, \r\nadopted a relatively cautious attitude towards the strength of \r\nretail activity. Thus, the treasurer of a large nationwide chain of \r\nretail department stores specializing in softwear felt that much of \r\nthe rise in his firm's dollar volume reflected higher prices, with \r\nthe physical volume of sales running only moderately above last \r\nyear. He felt that official tabulations indicating increasing \r\nstrength in consumer spending were somewhat exaggerated, and \r\nreported that his firm as well as other retailers he had spoken to \r\nhad not as yet seen signs that consumer retail outlays were reaching \r\nsuch proportions. As a result, he felt that \"doubt was cast\" on some \r\nof the official statistics. Similarly, while the vice president of a \r\nlarge New York department store with branches in the suburbs \r\nreported a \"healthy\" rise in his firm's sales in dollar terms, he \r\nnoted that higher prices accounted for a good part of this increase. \r\nAll of the Buffalo branch directors detected a continuing upward \r\ntrend in retail activity, with a \"spurt\" in some areas related to \r\nseasonal factors. The New York bank directors, however, \r\ncharacterized the pick up in retail sales as \"moderate\" to \"slow\".\nAll of the respondents felt that businessmen were continuing to \r\npursue cautious policies toward increasing their inventories, and \r\nthat such building as was taking place was largely due to special \r\ncircumstances. The chairman of the board of a large manufacturing \r\nconcern reported that he knew of no company accumulating inventories \r\nwith speculative motives,\" but he thought that some accumulation was \r\ntaking place as the result of special factors, such as anticipations \r\nof strikes and environmental protection measures\u2014especially the \r\nspreading ban on phosphates and restrictions on the paper industry. \r\nThe vice president of Rochester's largest firm also reported that \r\nstrike-hedging purchases had resulted in a substantial increase in \r\ninventories at his firm. However, he also pointed to the trend among \r\nretailers to limit their inventories and to rely increasingly upon \r\nthe ready availability of adequate stocks from jobbers and \r\ndistributors. The retailers who were contacted indicated there had \r\nbeen a slight rise in their inventories in preparation for an \r\nexpected increase in sales activity later on in the year.\nThe views of the directors regarding business loan demand seemed to \r\nindicate some strengthening. Thus, the presidents of three upstate \r\nbanks and the chairman of a large nationwide manufacturing concern \r\nfelt that the demand for this type of loan had increased in recent \r\nweeks, and one pointed particularly to the strength in the mortgage \r\narea. And, while the chairman of the board of another upstate bank \r\nreported that his bank had not experienced any strengthening of loan \r\ndemand, he noted that business loans are not a major part of his \r\nportfolio.\nThe respondents all continued to voice concern over the wage and \r\nprice situation, although on balance the opinions expressed seemed \r\nslightly less pessimistic than a month ago. Thus, Buffalo branch \r\ndirectors reported some slowdown in the rate of wage increases, \r\nparticularly among nonunionized concerns, and felt this trend might \r\ncontinue for the balance of the year. On the other hand, no \r\nsignificant change in the rate of advance of prices was evident to \r\nany of the Buffalo directors. One of the two New York City \r\nmanufacturing executives on this bank's board saw inflation as \r\ncontinuing, but detected signs of an easing in wage increases. The \r\nother New York manufacturer saw a pattern of first-year wage \r\nincreases averaging about 10 percent \"less of a disaster\" than \r\nprevious increases, but \"still a disaster\" since he expected \r\nproductivity to rise by only 3 percent to 3 1/2 percent in most \r\nindustries.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-06-at

"Beige Book Report: Atlanta\nJune 23, 1971\nReports of leading businessmen and bankers indicate the recovery is \r\ncontinuing but at a slow pace. The outlook has turned mixed, after \r\nbeing optimistic. One Alabama businessman describes the economy of \r\nhis area as continuing a slow, barely perceptible growth. Another \r\nbusinessman reports growing uneasiness about the sluggishness of \r\nrecovery. Yet another speaks of a more confident atmosphere. \r\nAnnouncements of plant expansions continue, but a few plant closings \r\nand sizable layoffs have cropped up. Construction is strong, with \r\nsome exceptions.\nOn balance, there is little vigor in manufacturing. Some companies \r\nin Tennessee are reported to be operating on only a four-day week, \r\nand even then inventories are piling up. An Alabama industrialist \r\nreports that manufacturing is the \"weak spot\" in the Alabama \r\neconomy. A north Florida banker, who has been reporting strong \r\neconomic gains in his vicinity, now describes activity as being on a \r\nplateau.\nThere have been a number of layoffs and plant closings in recent \r\nweeks. Between 500 and 750 workers have been idled by an aluminum \r\ncompany, reportedly because of stockpiling before the recent labor \r\nnegotiations. A textile mill employing 1,000 in Alabama is scheduled \r\nto close, but an effort is underway to try to find a buyer to take \r\nover the operation. About 300 workers are being laid off in Alabama \r\nbecause a vending machine manufacturing operation is closing. A \r\nspinning plant in Georgia has idled 200 and is anticipating another \r\n200-man layoff, allegedly because of air pollution problems and \r\nforeign competition. An engineering firm in Tennessee is laying off \r\n120 workers because of reduced aerospace research and rising costs. \r\nOn the other hand, it has been reported that some firms that did not \r\nrecruit at the University of Tennessee in the spring are planning to \r\nreturn this fall.\nNew plant announcements have been slow but steady. They include an \r\nelectric motor plant in Mississippi, a carpet dyeing and finishing \r\nplant in Georgia, a mobile home plant in Georgia, a plant to \r\nmanufacture leisure wear in Tennessee, and three plants to separate \r\nsulfur from oil produced in Alabama and Florida. Several plant \r\nexpansions are occurring at a variety of businesses in Tennessee.\nOutside of manufacturing, there are signs of economic strength. \r\nSouth Florida tourist business is vigorous. Long distance calls and \r\ntelephone installations in Alabama are increasing strongly. Air \r\ntraffic has picked up in the Tampa area. Retail sales are generally \r\nreported good, with one merchant noting that consumers have started \r\nto charge more of their purchases, presumably an indication of \r\nincreased consumer confidence.\nConstruction activity is generally reported to be strong. Jackson, \r\nMississippi, for example, is experiencing a high level of activity, \r\nand two large motel complexes have been announced recently. A \r\nshortage of skilled labor is anticipated in that area. A large \r\nresidential and industrial complex has been announced for an area \r\nnortheast of Atlanta. The northern Gulf Coast of Florida is \r\nexperiencing a motel and condominium building boom. Residential \r\nconstruction is brisk in the Auburn, Alabama, area. Builders there \r\nare planning to construct speculative houses in the $23,000 to \r\n$27,000 class because they are moving much faster than homes in the \r\n$35,000 to $45,000 class. Another residential recreation project is \r\ngoing to be built on a lake in east central Alabama. A $15 million \r\ncondominium is planned for St. Petersburg. Counter to the generally \r\nfavorable construction news, condominiums are reported to be \r\noverbuilt in south Florida, and construction is reported to be at a \r\nvery low level in Lake Charles, Louisiana, where some announced \r\nprojects have not as yet commenced.\nTwo prominent businessmen report growing concern over the inability \r\nto lick inflation.\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/1971/1971-06-su

"Beige Book: National Summary\nJune 23, 1971\nReports in this Red Book generally confirm the slightly more \r\noptimistic tone of the two previous issues. Most districts report \r\nmoderate improvement both in retail sales and in manufacturers' \r\nshipments and orders. Residential construction is very strong almost \r\neverywhere. Defense cutbacks continue. Demand for business equipment \r\nremains weak. Unemployment remains high with no present prospects \r\nfor improvement. Employment generally is steady to slightly higher. \r\nAlthough a few scattered price declines were noted, one of the \r\nclearest impressions through the district reports is a strengthening \r\nof the inflationary psychology\u2014in large part because of generous \r\nwage settlements. Authorized and wildcat strikes continue to hamper \r\nactivity.\nIn the financial sector, a pickup in loan demand was noted in a \r\nnumber of districts\u2014especially New York, Chicago, and San Francisco. \r\nConsumer and mortgage loan demand also is up. Savings inflows at \r\nbanks have slowed, but remain at a high level. Interest rates \r\ncharged by banks have firmed. Home mortgage rates are steady to \r\nhigher\u2014by a quarter percentage point or more.\nBusinessmen and bankers now have learned to refer to the rapid \r\ngrowth of the money supply, which they typically deem excessive and \r\ninflationary. One \"verbose\" academician, however, finds the rapid \r\ngrowth of the money supply to be eminently appropriate to \r\nconditions. Increases in retail sales were reported in most \r\ndistricts, but higher prices account for most of the gain from last \r\nyear. Stronger sales of autos, appliances, and home furnishings were \r\nnoted in a number of districts. A pickup in tourism was observed in \r\nthe Minneapolis and Atlanta Districts.\nThe pace of the recovery appears to have moderated in the Cleveland \r\nDistrict, but this partly reflects the beginning of the cutback in \r\nsteel production as inventory buildups are completed. Districts \r\ncommenting on the potential steel strike that may start August 1, \r\nexpected a settlement or a relatively short strike.\nAmong the strongest sectors are residential construction and the \r\nindustries that supply building materials and components. At the \r\nother extreme are defense industries and capital goods (other than \r\nutilities)\u2014with machine tools severely depressed. In some districts\u2014Richmond and Atlanta\u2014strength in nonresidential construction was \r\nnoted.\nBusiness inventories, except for strike hedges, are generally under \r\ngood control\u2014a point emphasized by New York and\r\nSt. Louis. Richmond \r\nfinds some manufacturers' inventories on the high side.\nA number of districts commented on farm income prospects. Drought \r\nconditions are hurting crops and cattle in the Dallas District, \r\nwhile growing conditions are favorable in the San Francisco and St. \r\nLouis Districts. Planted corn acreage is larger this year in the \r\nChicago District, and crop prospects would be favorable, but for the \r\nspecter of the corn blight. In general, it is expected that higher \r\nprices will boost farm cash receipts in the nation in the second \r\nhalf of 1971, but net farm income for the year may be lower than in \r\n1970 because of rising costs.\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/1971/1971-06-su

"Beige Book: National Summary\nJune 23, 1971\nReports in this Red Book generally confirm the slightly more \r\noptimistic tone of the two previous issues. Most districts report \r\nmoderate improvement both in retail sales and in manufacturers' \r\nshipments and orders. Residential construction is very strong almost \r\neverywhere. Defense cutbacks continue. Demand for business equipment \r\nremains weak. Unemployment remains high with no present prospects \r\nfor improvement. Employment generally is steady to slightly higher. \r\nAlthough a few scattered price declines were noted, one of the \r\nclearest impressions through the district reports is a strengthening \r\nof the inflationary psychology\u2014in large part because of generous \r\nwage settlements. Authorized and wildcat strikes continue to hamper \r\nactivity.\nIn the financial sector, a pickup in loan demand was noted in a \r\nnumber of districts\u2014especially New York, Chicago, and San Francisco. \r\nConsumer and mortgage loan demand also is up. Savings inflows at \r\nbanks have slowed, but remain at a high level. Interest rates \r\ncharged by banks have firmed. Home mortgage rates are steady to \r\nhigher\u2014by a quarter percentage point or more.\nBusinessmen and bankers now have learned to refer to the rapid \r\ngrowth of the money supply, which they typically deem excessive and \r\ninflationary. One \"verbose\" academician, however, finds the rapid \r\ngrowth of the money supply to be eminently appropriate to \r\nconditions. Increases in retail sales were reported in most \r\ndistricts, but higher prices account for most of the gain from last \r\nyear. Stronger sales of autos, appliances, and home furnishings were \r\nnoted in a number of districts. A pickup in tourism was observed in \r\nthe Minneapolis and Atlanta Districts.\nThe pace of the recovery appears to have moderated in the Cleveland \r\nDistrict, but this partly reflects the beginning of the cutback in \r\nsteel production as inventory buildups are completed. Districts \r\ncommenting on the potential steel strike that may start August 1, \r\nexpected a settlement or a relatively short strike.\nAmong the strongest sectors are residential construction and the \r\nindustries that supply building materials and components. At the \r\nother extreme are defense industries and capital goods (other than \r\nutilities)\u2014with machine tools severely depressed. In some districts\u2014Richmond and Atlanta\u2014strength in nonresidential construction was \r\nnoted.\nBusiness inventories, except for strike hedges, are generally under \r\ngood control\u2014a point emphasized by New York and\r\nSt. Louis. Richmond \r\nfinds some manufacturers' inventories on the high side.\nA number of districts commented on farm income prospects. Drought \r\nconditions are hurting crops and cattle in the Dallas District, \r\nwhile growing conditions are favorable in the San Francisco and St. \r\nLouis Districts. Planted corn acreage is larger this year in the \r\nChicago District, and crop prospects would be favorable, but for the \r\nspecter of the corn blight. In general, it is expected that higher \r\nprices will boost farm cash receipts in the nation in the second \r\nhalf of 1971, but net farm income for the year may be lower than in \r\n1970 because of rising costs.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-06-da

"Beige Book Report: Dallas\nJune 23, 1971\nThe economy in the Southwest is still somewhat weaker than a year \r\nago in the opinion of economic analysts with the Southwest regional \r\noffice of the U. S. Department of Labor and with the district \r\nstates' Labor Commissions. However, a slim majority felt that the \r\nsituation would improve by year end. But these analysts generally \r\ndid not expect the current rate of inflation to change much by year \r\nend. Most expect area prices to increase about the same as \r\nnationally, and for these price increases to be mainly in consumer \r\ndurables and services. In addition, they also anticipate moderate \r\nincreases in both short and long interest rates over the balance of \r\nthe year.\nMost of the respondents view the present level of employment as \r\nabout the same as it was at the end of last year. But a few analysts \r\nreporting on New Mexico and Oklahoma felt that the situation has \r\nworsened in their states. About half indicated that the unemployment \r\nproblem in their region was concentrated in relatively few areas. \r\nCounties with defense industries or Indian reservations and counties \r\nin southwestern New Mexico and in southern Texas are feeling the \r\npinch in particular. For the district as a whole,\ndefense-related \r\nindustries were cited as industries in which unemployment problems \r\nwere most severe. However, a number of other industries were also \r\nreported as suffering high unemployment in the different district \r\nstates, including transportation equipment, electrical equipment, \r\ngeneral services, and construction.\nMoreover, the outlook for employment in the Southwest is not \r\nparticularly promising. Only about half of the respondents felt that \r\nthe situation would improve somewhat by year end, with the others \r\nanticipating no change or some further increase in unemployment. \r\nAlso, everyone thought the outlook for summer employment is \r\nparticularly bleak.\nThose that expected some improvement in the unemployment situation \r\nfelt that it would be selective, likely to occur principally in \r\nconstruction, manufacturing, trade, and state and local governments. \r\nThose anticipating no change or a worsening in unemployment \r\nemphasized the anticipated growth in the labor force. They pointed \r\nout that the labor force had increased substantially since a year \r\nago, reflecting in part returning veterans, entering youth, and \r\nmigration. Moreover, it is anticipated that virtually every labor \r\ncategory, with the exceptions of unskilled and agricultural labor, \r\nwill increase between now and year end.\nMost did feel, however, that the impact of unemployment had fallen \r\nless on minority groups in past months than it had in other periods \r\nof economic slowdown. But they thought that the outlook for minority \r\ngroup employment was no better or worse than that for workers as a \r\nwhole.\nDistrict economic indicators available since the last issue of the \r\nRed Book continue to evidence a mild upturn. Registrations of new \r\npassenger cars in Dallas, Fort Worth, Houston, and San Antonio were \r\n8 percent lower in May than in April, but continued to be 9 percent \r\ngreater than the same period a year ago. Department store sales were \r\n9 percent higher in the four weeks ended June 12 than for the \r\ncorresponding period a year before, and 8 percent higher on a \r\ncumulative basis this year than for the same period last year. The \r\nTexas Railroad Commission, however, reduced Texas oil production \r\nallowables from June's allowable of 75.4 to a factor of 68.7 percent \r\nfor July. New Mexico also cut her production allowable for her \r\nsoutheast fields from 80 barrels to 70 barrels a day per well.\nAgricultural conditions in the Eleventh District remain somewhat \r\nprecarious. Recent rains have failed to totally break the drought in \r\nArizona, New Mexico, and Texas, and arrived too late to aid the \r\nsmall grain crops. Range and cattle conditions in the four western \r\nstates remain substantially below the ten-year average due to \r\ndrought stress. The outlook depends largely on the adequacy of water \r\nsupplies, both irrigation and rainfall. Arizona and New Mexico both \r\nface possible water shortages, but at this time irrigated crops \r\nthroughout the district are progressing well.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-06-da

"Beige Book Report: Dallas\nJune 23, 1971\nThe economy in the Southwest is still somewhat weaker than a year \r\nago in the opinion of economic analysts with the Southwest regional \r\noffice of the U. S. Department of Labor and with the district \r\nstates' Labor Commissions. However, a slim majority felt that the \r\nsituation would improve by year end. But these analysts generally \r\ndid not expect the current rate of inflation to change much by year \r\nend. Most expect area prices to increase about the same as \r\nnationally, and for these price increases to be mainly in consumer \r\ndurables and services. In addition, they also anticipate moderate \r\nincreases in both short and long interest rates over the balance of \r\nthe year.\nMost of the respondents view the present level of employment as \r\nabout the same as it was at the end of last year. But a few analysts \r\nreporting on New Mexico and Oklahoma felt that the situation has \r\nworsened in their states. About half indicated that the unemployment \r\nproblem in their region was concentrated in relatively few areas. \r\nCounties with defense industries or Indian reservations and counties \r\nin southwestern New Mexico and in southern Texas are feeling the \r\npinch in particular. For the district as a whole,\ndefense-related \r\nindustries were cited as industries in which unemployment problems \r\nwere most severe. However, a number of other industries were also \r\nreported as suffering high unemployment in the different district \r\nstates, including transportation equipment, electrical equipment, \r\ngeneral services, and construction.\nMoreover, the outlook for employment in the Southwest is not \r\nparticularly promising. Only about half of the respondents felt that \r\nthe situation would improve somewhat by year end, with the others \r\nanticipating no change or some further increase in unemployment. \r\nAlso, everyone thought the outlook for summer employment is \r\nparticularly bleak.\nThose that expected some improvement in the unemployment situation \r\nfelt that it would be selective, likely to occur principally in \r\nconstruction, manufacturing, trade, and state and local governments. \r\nThose anticipating no change or a worsening in unemployment \r\nemphasized the anticipated growth in the labor force. They pointed \r\nout that the labor force had increased substantially since a year \r\nago, reflecting in part returning veterans, entering youth, and \r\nmigration. Moreover, it is anticipated that virtually every labor \r\ncategory, with the exceptions of unskilled and agricultural labor, \r\nwill increase between now and year end.\nMost did feel, however, that the impact of unemployment had fallen \r\nless on minority groups in past months than it had in other periods \r\nof economic slowdown. But they thought that the outlook for minority \r\ngroup employment was no better or worse than that for workers as a \r\nwhole.\nDistrict economic indicators available since the last issue of the \r\nRed Book continue to evidence a mild upturn. Registrations of new \r\npassenger cars in Dallas, Fort Worth, Houston, and San Antonio were \r\n8 percent lower in May than in April, but continued to be 9 percent \r\ngreater than the same period a year ago. Department store sales were \r\n9 percent higher in the four weeks ended June 12 than for the \r\ncorresponding period a year before, and 8 percent higher on a \r\ncumulative basis this year than for the same period last year. The \r\nTexas Railroad Commission, however, reduced Texas oil production \r\nallowables from June's allowable of 75.4 to a factor of 68.7 percent \r\nfor July. New Mexico also cut her production allowable for her \r\nsoutheast fields from 80 barrels to 70 barrels a day per well.\nAgricultural conditions in the Eleventh District remain somewhat \r\nprecarious. Recent rains have failed to totally break the drought in \r\nArizona, New Mexico, and Texas, and arrived too late to aid the \r\nsmall grain crops. Range and cattle conditions in the four western \r\nstates remain substantially below the ten-year average due to \r\ndrought stress. The outlook depends largely on the adequacy of water \r\nsupplies, both irrigation and rainfall. Arizona and New Mexico both \r\nface possible water shortages, but at this time irrigated crops \r\nthroughout the district are progressing well.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-06-mi

"Beige Book Report: Minneapolis\nJune 23, 1971\nAlthough directors of this bank have not experienced any significant \r\nincreases in wholesale prices in their businesses over the past \r\nmonth, they are not optimistic in expectations of future costs and \r\nprices. Capital spending plans among district businessmen, while \r\nstill relatively bearish, do not seem to have changed since the \r\nbeginning of the year. Retailers did not experience any significant \r\nrise in consumer spending in the past few weeks but are still \r\noptimistic in their sales forecasts. Meanwhile, tourist activity, \r\nwhich is beginning to expand seasonally, is expected to rise about 6 \r\nto 10 percent this year over last.\nContrary to what would be expected because of the significant rise \r\nin the wholesale price index during May, the directors of this bank \r\nwere generally unaware of any significant price changes in their \r\nbusinesses over the past month. Among industries with recent price \r\nincreases are packaging materials, wholesale groceries, \r\nconstruction, and raw materials used in manufacturing heavy \r\nequipment. A number of directors, however, were able to cite cases \r\nwhere prices had actually declined over the past month\u2014most notably, \r\nready-to-wear clothing and apparel industries. One director felt \r\nthat these recent reductions, primarily caused by an increase in \r\nforeign competition, were large enough so that retail clothing \r\nprices this summer will not be higher than they were last year. \r\nWholesale cattle prices also have slipped in the past few weeks.\nThe directors did not view these recent price reductions as \r\nindications of curtailment in inflation; the prevailing opinion \r\nstill seems to be that prices will continue to rise. In the \r\nconstruction industry, for example, increases in steel are expected \r\nlater on this summer, and another general round of price rises are \r\nanticipated after January 1 of next year. One director, who is the \r\npresident of a utilities firm, said that, \"purchasing agents, with \r\nfew exceptions, continue to think of rather large price increases as \r\na way of life. When anticipating future outlays, the big question is \r\nwhether to build in expected cost increases of 7 to 10 percent.\"\nManufacturers in the Ninth District apparently have not changed \r\ntheir expectations regarding capital spending plans. Investment \r\nthroughout the district is at a reduced level, but this is the \r\nresult of decisions made as early as 1969 and not because area \r\nbusinessmen have recently reduced their anticipations.\nConsumer spending has not changed in the past few weeks, although \r\nretailers continue to be optimistic. The directors felt that auto \r\nsales in the district were doing a little better than earlier in the \r\nyear, despite a tendency for consumers to buy lower-priced units. \r\nDepartment store sales also appear to have picked up, largely \r\nbecause of the recent changes in fashions.\nIt is still early in the season, yet tourist operators throughout \r\nthe district are already expecting an increase in summer tourist \r\ntravel. A number of directors have noticed a significant increase in \r\ncampers and trailers on the road, and advance reservations at \r\nresorts and motels suggest that tourist activity in the district \r\nwill rise about 6 to 10 percent this year.\nMortgage interest rates in the Twin Cities have become slightly more \r\nrestrictive in the past few weeks. Whereas government-insured \r\nmortgages in the Twin Cities were down to around 7 percent plus 2 \r\npoints to the seller as recently as a month ago, a minimum of 3 \r\npoints is now being charged to the seller. A number of lenders also \r\nhave raised conventional mortgage rates to 7 3/4 percent from the 7 \r\n1/2 percent which prevailed three weeks ago.\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/1971/1971-06-sl

"Beige Book Report: St Louis\nJune 23, 1971\nBusinessmen in the Eighth District indicate that the upward economic \r\ntrend of recent months is continuing and they are \"reasonably \r\noptimistic\" about business prospects for the rest of the year. \r\nHowever, many businessmen expressed concern that inflation will \r\ncontinue unabated. Retail and manufacturing sales, production, and \r\nconstruction continue their upward advance from the autumn trough. \r\nFinancial agencies are pessimistic as to loan demand, but report \r\nthat they must continue to pay high rates for funds in order to \r\nattract savings. The outlook for agriculture and related industries \r\nis more promising now that weather conditions have improved.\nRepresentatives of major retail outlets in the district report \r\ncontinuing increases in sales. Some feel that the recent rise in \r\nsales volume reflects a less apprehensive consumer attitude with \r\nrespect to the economy. None indicated a relaxation of the more \r\nstringent inventory policies initiated last year, despite their \r\nbelief that sales will continue to be strong through the fall.\nThe trend of manufacturing sales and production remains basically \r\nunchanged from last month. Manufacturing respondents indicate \r\nemployment is holding steady and foresee no significant increase in \r\nhirings in the near future. The machine tool business still has not \r\nrecovered from its recent slump.\nBusiness investment continues to rise slowly, and respondents \r\nindicate that investment this year will be slightly above last \r\nyear's dollar volume but less in real terms.\nBoth residential and industrial construction continue to expand \r\nthroughout the district. Construction in St. Louis county, the \r\nlargest county in the district, set a record in the first five \r\nmonths of this year, according to the public works director. Total \r\nconstruction in the first five months of this year reached $81 \r\nmillion, exceeding the previous record set in 1969 by $5 million and \r\nthe 1970 total by $26 million. Housing construction is likewise \r\nreported to be vigorous in other metropolitan areas of the district.\nLoan demand has apparently lagged behind other economic indicators \r\nin the Eighth District. The decline in business loan demand at \r\ncommercial banks, which began last December, seems to have ended. \r\nHowever, no substantial increase in commercial loan demand is \r\nexpected until the end of the third quarter. One respondent stated \r\nthat the prime rate is too low in light of the high rates paid on \r\ndeposits, and anticipates raising the prime rate in the near future.\nDespite the rise in construction, loanable funds at savings and loan \r\nassociations in the St. Louis area continue to be available with \r\nlittle change in interest rates. This is due to the extremely rapid \r\nflow of deposits into these institutions in recent months. One \r\nsavings and loan association official expressed concern about the \r\npossibility of higher market interest rates, which in view of the \r\nceiling on rates paid, may lead to a slower rate of growth in \r\ndeposits.\nThe outlook for agriculture and farm-related business has picked up \r\nin recent weeks. The earlier adverse weather conditions, which \r\nrequired many crops to be replanted, have generally improved, and \r\nfarmers are now more optimistic. Increased agri-business sales were \r\nreported. Herbicide sales were especially strong, in part reflecting \r\nincreased crop acreage.\nProgress of government efforts to curb inflation has been \r\ndisappointing to most respondents. They are concerned about recent \r\nlarge wage settlements which they feel set dangerous precedents for \r\nfuture wage negotiations. Many businessmen expressed concern about \r\nthe recent acceleration in the rate of growth of the money stock. \r\nOne respondent stated that this rapid growth of money will cause \r\ninflation to be an \"uncomfortable yoke for some time to come.\"\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/1971/1971-06-sf

"Beige Book Report: San Francisco\nJune 2, 1971\nAccording to reports received from bankers and businessmen in the \r\nTwelfth District, there has been no major change in the general pace \r\nof economic activity. Growth is at a moderate rate, as consumer \r\nspending remains steady and business investment plans are cautious. \r\nThe recovery of the housing industry and the real estate markets is \r\nexpected to be a growing element of strength in most areas, but the \r\naerospace industry continues to cause problems in Washington and \r\nparts of California.\nOur directors were asked to comment on investment activities in \r\ntheir area or industry. Most reported that, in the absence of a \r\nstronger expansion in demand, there would be no major increase in \r\ninvestment expenditures. Industrial firms are either carrying \r\nthrough programs planned earlier in the year without any recent \r\nupward modification or else limiting themselves to projects which \r\npromise immediate benefits in the form of cost reduction. Certainly \r\nthere is no evidence that inventories are being built up. Firms \r\ncontinue to keep inventories closely tied to sales in order to \r\nreduce costs. A major oil company, for example, describes its \r\ninventories as \"low but manageable.\" On the other hand, public \r\ninvestment is expected to be heavier in some states and large office \r\nbuilding projects are continuing to be important in many of the \r\nmajor cities in the District.\nThe greatest weakness is in those areas where the aerospace industry \r\nis important. The Seattle-Tacoma District of Washington continues to \r\nexperience low or declining retail sales and a stagnant real estate \r\nmarket. A further reduction in aerospace employment is expected. \r\nHowever, the local economy is described by one director as having \r\nreached a \"hard floor\" under personal income, but there will be no \r\nturnabout until the spring of 1972. The problems of Lockheed are \r\ncausing further uncertainty in those parts of California where that \r\nfirm and its principal suppliers are located; suppliers to the \r\naerospace industry are reported to expect no pickup this year and \r\nvery little next year.\nThe amount of vacant industrial property continues to rise in \r\nsouthern California. As one example, the vacancy factor for \r\nindustrial buildings is 25 percent in some parts of Orange County.\nHousing activity continues to grow in most states of the District. \r\nCommercial construction, especially large shopping areas and \r\nmultistory buildings, continues to be important in California, \r\nIdaho, and Utah. Several large banks, for example, are constructing \r\nlarge, new head offices. The greater availability and lower cost of \r\nmortgage funds in the past few months has helped to stimulate real \r\nestate sales and construction activity.\nThe greater construction activity has helped the forest products \r\nindustries, but the demand from construction is not sufficient to \r\nbring about a full recovery in that industry. The demand for plywood \r\nis weak, and prices for that particular product are falling. In \r\nwestern Washington, wood products are described as facing a poor \r\nmarket after anticipating an improvement, while in parts of Oregon, \r\nlumber mill employment is higher.\nThe prospects for agriculture are mixed. In western Washington, wet \r\nweather has created poor prospects for the local fruit crop. In \r\nIdaho, the picture for cattle prices is good, while that for the \r\npotato market is still uncertain because of the large carry-over \r\nfrom the previous crop.\nRetail expenditures remain one of the stronger sources of demand, \r\nyet the rate of growth has not been great. Retail sales in some \r\nareas are reported as being at only the same level as last year, \r\nwhile in other cases, appliance sales are running 10 to 15 percent \r\nabove levels of last year. New car sales are improving, but much of \r\nthis activity is due to sales of small foreign cars. Overall, \r\nconsumers are described as cautious.\nBankers continue to experience inflows of deposits, especially \r\nsavings deposits. Also, there has been some firming of the demand \r\nfor business and mortgage loans. Many banks are still attempting to \r\nexpand their lending to make use of their larger supplies of funds. \r\nThere has been some adjustment in interest rates., In most cases, \r\nthe prime rate has been adjusted upward but not other lending rates \r\nto any degree. Most, but not all, banks have lowered their passbook \r\nsavings rate\nto 4 percent.\nIn summary, there has been little change in economic or financial \r\nconditions, and the general expectation is for a continued gradual \r\nexpansion of the economy.\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/1971/1971-06-sf

"Beige Book Report: San Francisco\nJune 2, 1971\nAccording to reports received from bankers and businessmen in the \r\nTwelfth District, there has been no major change in the general pace \r\nof economic activity. Growth is at a moderate rate, as consumer \r\nspending remains steady and business investment plans are cautious. \r\nThe recovery of the housing industry and the real estate markets is \r\nexpected to be a growing element of strength in most areas, but the \r\naerospace industry continues to cause problems in Washington and \r\nparts of California.\nOur directors were asked to comment on investment activities in \r\ntheir area or industry. Most reported that, in the absence of a \r\nstronger expansion in demand, there would be no major increase in \r\ninvestment expenditures. Industrial firms are either carrying \r\nthrough programs planned earlier in the year without any recent \r\nupward modification or else limiting themselves to projects which \r\npromise immediate benefits in the form of cost reduction. Certainly \r\nthere is no evidence that inventories are being built up. Firms \r\ncontinue to keep inventories closely tied to sales in order to \r\nreduce costs. A major oil company, for example, describes its \r\ninventories as \"low but manageable.\" On the other hand, public \r\ninvestment is expected to be heavier in some states and large office \r\nbuilding projects are continuing to be important in many of the \r\nmajor cities in the District.\nThe greatest weakness is in those areas where the aerospace industry \r\nis important. The Seattle-Tacoma District of Washington continues to \r\nexperience low or declining retail sales and a stagnant real estate \r\nmarket. A further reduction in aerospace employment is expected. \r\nHowever, the local economy is described by one director as having \r\nreached a \"hard floor\" under personal income, but there will be no \r\nturnabout until the spring of 1972. The problems of Lockheed are \r\ncausing further uncertainty in those parts of California where that \r\nfirm and its principal suppliers are located; suppliers to the \r\naerospace industry are reported to expect no pickup this year and \r\nvery little next year.\nThe amount of vacant industrial property continues to rise in \r\nsouthern California. As one example, the vacancy factor for \r\nindustrial buildings is 25 percent in some parts of Orange County.\nHousing activity continues to grow in most states of the District. \r\nCommercial construction, especially large shopping areas and \r\nmultistory buildings, continues to be important in California, \r\nIdaho, and Utah. Several large banks, for example, are constructing \r\nlarge, new head offices. The greater availability and lower cost of \r\nmortgage funds in the past few months has helped to stimulate real \r\nestate sales and construction activity.\nThe greater construction activity has helped the forest products \r\nindustries, but the demand from construction is not sufficient to \r\nbring about a full recovery in that industry. The demand for plywood \r\nis weak, and prices for that particular product are falling. In \r\nwestern Washington, wood products are described as facing a poor \r\nmarket after anticipating an improvement, while in parts of Oregon, \r\nlumber mill employment is higher.\nThe prospects for agriculture are mixed. In western Washington, wet \r\nweather has created poor prospects for the local fruit crop. In \r\nIdaho, the picture for cattle prices is good, while that for the \r\npotato market is still uncertain because of the large carry-over \r\nfrom the previous crop.\nRetail expenditures remain one of the stronger sources of demand, \r\nyet the rate of growth has not been great. Retail sales in some \r\nareas are reported as being at only the same level as last year, \r\nwhile in other cases, appliance sales are running 10 to 15 percent \r\nabove levels of last year. New car sales are improving, but much of \r\nthis activity is due to sales of small foreign cars. Overall, \r\nconsumers are described as cautious.\nBankers continue to experience inflows of deposits, especially \r\nsavings deposits. Also, there has been some firming of the demand \r\nfor business and mortgage loans. Many banks are still attempting to \r\nexpand their lending to make use of their larger supplies of funds. \r\nThere has been some adjustment in interest rates., In most cases, \r\nthe prime rate has been adjusted upward but not other lending rates \r\nto any degree. Most, but not all, banks have lowered their passbook \r\nsavings rate\nto 4 percent.\nIn summary, there has been little change in economic or financial \r\nconditions, and the general expectation is for a continued gradual \r\nexpansion of the economy.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-06-ri

"Beige Book Report: Richmond\nJune 2, 1971\nRecent surveys of businessmen and bankers in the Fifth District \r\nindicate general agreement on the following points: (1) in \r\nmanufacturing, reduced backlogs of orders with slight improvements \r\nin shipments and new orders; (2) substantial increases in \r\nmanufacturing wages; (3) continued improvement in retail sales \r\nincluding automobiles; (4) substantial increases in loan demand, \r\nparticularly business and mortgage loans; and (5) decreased optimism \r\nregarding future business conditions.\nImprovements reported last month in District manufacturing have \r\ncontinued. Survey respondents indicated an increase in shipments and \r\nvolume of new orders. Backlogs of orders, after showing a \r\nsignificant improvement in April, declined during May, according to \r\nrespondents.\nDistrict bankers and retailers report improved retail sales. \r\nAccording to bankers, however, automobile sales were not up as much \r\nas they were in the previous month. Declines in inventories were \r\nreported by both manufacturers and retailers.\nManufacturers reported a slight improvement in employment. Very few \r\nrespondents indicated increases in employment, but the number \r\nreporting decreases was lower than in the previous period. There was \r\na slight increase in the number of bankers reporting decreases in \r\ntheir areas. District retailers report improvement in the employment \r\nsituation.\nRetailing and manufacturing respondents indicated continued \r\nincreases in prices received. Upward pressures on wages continued, \r\nwith more than one-half of the respondents in manufacturing and \r\nretailing and services reporting increased wage costs.\nThe construction sector of the Fifth District economy continues to \r\nbe strong. Both residential and nonresidential construction showed \r\nsubstantial improvement in the District during the reporting period.\nRespondents indicated that the demand for all types of loans \r\nincreased in May. More than four-fifths of the bankers reporting \r\nindicated an increase in the demand for mortgage loans, and more \r\nthan one-half reported increased demand for business and consumer \r\nloans.\nDistrict cash receipts from farm marketings continue to run below \r\nthose of a year ago, although the decline is not as great as it was \r\nearlier in the year. Total cash receipts during the first quarter \r\nwere 5 percent below those in the same period a year earlier. An 8-percent decline in livestock receipts more than offset a 7-percent \r\nincrease in receipts from crops.\nAlthough optimism has declined somewhat since the last survey, \r\nrespondents remain optimistic on balance. Increased activity in \r\nconstruction\u2014both residential and nonresidential\u2014and in retail sales \r\naccounts for this guardedly optimistic outlook.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-06-cl

"Beige Book Report: Cleveland\nJune 2, 1971\nThis report is based on information obtained from about 50 \r\neconomists who attended a regularly scheduled meeting of the Fourth \r\nDistrict Business Economists' Round Table held at the Federal \r\nReserve Bank of Cleveland on May 27, 1971. The consensus forecast \r\nfor the remainder of 1971 that emerged from this meeting indicated \r\nmoderate real growth, continued high unemployment, and only a modest \r\nimprovement in the rate of inflation. In general, the group's \r\noutlook was changed little from the projections presented at our \r\nprevious meeting on January 29, 1971.\nThe group's median forecast of current dollar GNP for 1971 was \r\nrevised slightly upward from $1,045 billion to $1,050 billion. \r\nHowever, their estimate of the GNP deflator was also increased from \r\na year-to-year gain of 4.2 percent to 4.7 percent. Thus, real growth \r\nfor the year is still estimated to be only 2.7 percent. Moreover, \r\nseveral members expected an acceleration in the Consumer Price Index \r\nto a 4-percent annual rate during the second half of 1971, \r\nreflecting higher food prices and upward pressure on mortgage \r\ninterest rates. With only moderate real growth anticipated, the \r\nbusiness economists remained generally pessimistic about the \r\nprospects of any appreciable improvement in the recent\n6-percent \r\nlevel of unemployment in 1971.\nThe majority of the economists noted that the strengthening of \r\neconomic activity in the first quarter was generally in line with \r\ntheir expectations. Discounting the effects of the rebound from the \r\nauto strike and other distorting influences in the first quarter, \r\nthe recovery of overall economic activity was moderate. Most of the \r\nunderlying strength in the first quarter was centered in the \r\ninterest rate sensitive areas of residential construction and state \r\nand local government spending. A large number of the Round Table \r\nmembers indicated concern that further increases in interest rates \r\nmight choke off a continued expansion in these sectors later this \r\nyear. Several economists asserted that mortgage rates have \r\napparently bottomed out at relatively high levels, and \r\nrepresentatives of several large commercial banks reported that the \r\nprospects for increases in the prime rate\u2014to perhaps 6 to 6 1/2 \r\npercent by the end of this year\u2014are strong.\nThe group did not foresee any significant improvement in the rate of \r\nbusiness spending this year; therefore, the strength of the recovery \r\nin the months ahead will depend increasingly upon consumer spending. \r\nMost of the economists noted scattered evidence of improvement in \r\nconsumer spending; however, no major surge in consumer spending was \r\nanticipated for the balance of this year. The group was encouraged \r\nby retail sales in March, April, and so far in May. Moreover, since \r\nthe fourth quarter of 1970, the advance in retail sales has become \r\nmore broadly based, reflecting some pickup in such hard goods as \r\nfurniture and appliances. The rate of new car sales, however, is \r\nexpected to decline following the first quarter post-strike rebound. \r\nThe median forecast of domestic new car sales in 1971, submitted by \r\nten economists associated with the automotive, steel, and rubber \r\nindustries, has been reduced slightly since the January meeting to \r\nan annual rate of 8.5 million units. Estimates of imported car \r\nsales, however, have been increased by approximately 300,000 units \r\nto a level of 1.5 million units. In total, retail sales are expected \r\nto rise 8 percent in 1971.\nSeveral steel industry economists reported that recent developments \r\nwithin their industry closely resemble the patterns experienced \r\nprior to the expiration of the labor contract in 1968. However, the \r\nsteel inventory build-up in 1971 is expected to be about one-half \r\nmillion tons less than in 1968, because the economy was weaker at \r\nthe beginning of 1971 and inventories held by steel consumers were \r\nmuch higher than in 1968. The median forecast for steel indicates \r\ndomestic steel consumption of 102.4 million tons, domestic steel \r\nshipments of 93.6 million tons, and steel ingot production of 132.2 \r\nmillion tons. New orders for steel reached a peak early this year, \r\nand it is expected that production and shipments will peak in May \r\nand June, respectively.\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/1971/1971-06-kc

"Beige Book Report: Kansas City\nJune 2, 1971\nBusinessmen continue to remain cautious on the economy. Steel \r\nstockpiling does not appear to be providing as strong an \r\nunderpinning to second quarter economic activity as was anticipated \r\nearlier. Although the supply of mortgage funds for financing \r\nresidential construction remains ample, the rate of deposit inflows \r\nis below the levels of earlier this year. One businessman is sure \r\nthe recent turnaround in interest rates will slow recovery, while \r\nanother thinks it represents a correction for an overly rapid \r\ndecline. Others feel that progress against inflation will be \r\nextremely difficult so long as monopoly power prevails to the extent \r\nthat it does. One of these rejects wage-price controls as \r\nunenforceable and ineffective because the cause is not treated. \r\nThus, considerable confusion exists as to what is happening and what \r\nneeds to be done.\nUsers and producers of steel indicate only modest stockpiling to \r\ndate. Some who are carrying larger-than-usual steel inventories give \r\nreasons other than, or in addition to, the likelihood of a strike. \r\nOne manufacturer blames lower-than-expected sales. Another claims to \r\nbe hedging against further price increases. Still another thinks a \r\nprolonged strike most unlikely, although he admits to buying steel \r\nahead\u2014just in case. One purchasing agent points to mill ads for \r\ncertain types of steel not normally available in shortage situations \r\nas evidence of little industrywide stockpiling. He adds that, if \r\nthere is not a strike, steel producers will be faced with a slow \r\nfourth quarter as users are evidently accumulating adequate \r\ninventories considering current rates of use.\nSteel producers and service centers throughout the District confirm \r\nthe reports of only light overall stockpiling by their customers. A \r\nmajor steel producer in the Denver area describes orders as \r\ndisappointing. He believes that steel demand is being held back by \r\nuncertainty in the economy and because steel companies are not \r\nproviding financing for 60 to 90 days this time as they have done \r\npreviously. A service center in Omaha says it is not doing much \r\nhedge buying because of the possibility of a construction strike in \r\nJune but may do a little after this uncertainty is resolved. Two \r\ncompanies in Oklahoma give similar reports of only light hedging. A \r\npair of steel distributors in Kansas City answered \"some\" to the \r\nquestion of steel stockpiling. One terms July an open-tonnage month, \r\nwith plenty of room for orders. This has not characterized past \r\nstrike-year patterns and gives users more room to hedge later, he \r\nsaid. The other pointed out that business is not such that firms are \r\nstockpiling in anticipation of strikes as in the past. Several of \r\nthose contacted pointed to foreign supplies of steel and supplies \r\nfrom independents unaffected by a strike as contributing to the \r\nreasons for little stockpiling.\nFarm machinery sales show some indications of improvement after two \r\nyears of sluggish activity. Within the Tenth District, however, the \r\nprospects remain somewhat mixed, as sales in those areas suffering \r\nfrom the current drought are not expected to improve over last year. \r\nIn fact, some decline seems likely. According to the machinery \r\ncompanies contacted, sales during the October-April period were \r\ngenerally disappointing\u2014running 5 to 10 percent below\nyear-earlier \r\nlevels. However, the companies indicated that sales have recently \r\npicked up sharply, as farmers moved into the spring planting season \r\nand began preparations for the wheat harvest. One company reported \r\nan 11-percent increase in combine sales, and all representatives \r\nstated that large tractors (l00+hp) have been moving especially \r\nwell. With the exception of the drought areas, the outlook is \r\ngenerally optimistic for the remainder of the year, with sales \r\nexpected to run moderately above 1970 levels. Much of the impetus \r\nfor this expected improvement arises from the more flexible planting \r\nfeatures of the new farm program, easier credit conditions, \r\nrelatively high grain prices, and the deferred buying actions taken \r\nby farmers during the past two years.\nThe demand for mortgage credit has been heavy during the past few \r\nmonths throughout the Tenth District, except in areas where layoffs \r\nhave been particularly high and have dampened consumer enthusiasm. \r\nDemand for funds to finance the purchase and construction of single-\r\nfamily units remains strong. The apparent bottoming out of interest \r\nrates has added some boost to demand, encouraging borrowers to go \r\nahead with their home buying plans rather than wait for lower \r\ninterest rates. However, the demand for funds may be slackening \r\nsomewhat in the multi-family area.\nSome increases in mortgage lending rates have occurred during recent \r\nweeks. In line with national developments, the points charged on \r\nFHA-VA insured mortgages have increased from the 2.5-3 to the 4-5 \r\narea during the past two weeks. In some cases, conventional mortgage \r\nrates have ticked up a notch. The prevailing rate on an 80-percent \r\nconventional loan is 7 1/2 percent (plus 1 percent origination fee).\nThe supply of mortgage funds for purchase and construction of \r\nconventional single-family units remains quite ample. Savings and \r\nloan associations report continuing strong deposit flows and \r\nmortgage commitments continue to rise. However, the rate of deposit \r\ninflows is below that which occurred earlier in the year. Savings \r\nand loan associations are responding by reducing their purchases of \r\nFHA-VA mortgages in the secondary market. This slowing of funds \r\nflowing into the secondary market is causing problems for some \r\nmortgage companies caught without commitments. In the multi-family \r\narea, the supply of funds has tightened in some cases due to the \r\nfeeling on the part of the lenders that some overbuilding may be \r\noccurring in this area.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-06-bo

"Beige Book Report: Boston\nJune 2, 1971\nFirst District directors continue to express guarded optimism on the \r\nprogress of the recovery, noting that the slight improvement in \r\nconsumer spending first reported last month seems to be continuing. \r\nHowever, prospects for a significant slowing of inflation over the \r\nrest of 1971 are considered poor. In the financial sector, the gains \r\nnoted for the past several months seem to be coming to an end. At \r\nBoston, area thrift institutions' conventional mortgage rates have \r\neased back up toward 8 percent from their April low of 7 1/2 \r\npercent, and the large deposit inflows seem to be tapering off. \r\nCredit availability remains good, however, at thrift institutions, \r\ncommercial banks, and large area insurance lenders. Despite the \r\nvirtual disappearance of equity kickers and a drop in effective \r\nyield of more than 600 basis points over the last eight months, \r\ninsurance companies are finding commercial mortgage demand very \r\nsluggish.\nAt the recent joint meeting of the First and Second District Boards \r\nof Directors, a list of common questions was given to each attending \r\nmember to elicit their sentiment regarding the current business \r\noutlook. Among the five Boston directors responding to these \r\nquestions, there was near unanimity. All agreed that the greater \r\nconsumer willingness to spend reported a month ago seems to be \r\ncontinuing, with two of our directors further noting that this trend \r\nseems to be developing even in the area of luxury items. Four of the \r\nfive expressed their conviction that housing starts for the year can \r\nhold at a 1.9-million unit level and that the primary deterring \r\nfactor to gains beyond this level is inflated home prices. The fifth \r\nmember, active in both commercial and mutual savings banking, noted \r\nthat in his area sales seem to be proceeding well in spite of home \r\nprices.\nAll five directors agreed that capacity utilization levels-not high, \r\nlong-term rate levels-will determine spending on plant and equipment \r\nover the next several quarters and that the outlook thus remains \r\nsomewhat weak. Of the three directors answering a question on recent \r\ndevelopments in the employment situation, two saw no changes and a \r\nthird noted a tendency to slightly longer workweeks.\nCommenting to the recent update of the DRI Model forecast and \r\nsubsequent developments, Professor Eckstein stated that the leading \r\nindicators have become an absolute hodgepodge of contradictions and \r\nconvey no sense of direction at all to him. Consistent with the \r\nlatest DRI solution ($1,050-billion GNP for 1971), Eckstein noted \r\nthat the extra inflation comes at least partly at the expense of the \r\nreal GNP, a result he feels is descriptive of the real world in the \r\nshort to medium run. In spite of the recent reversals in rate \r\nlevels, Eckstein advised the System to concentrate on the growth \r\nrates of money stock and free reserves over the next quarter, \r\nshooting for something like a 7- to 8-percent annual rate of M1 \r\ngrowth. Consistent with his past prescriptions, Professor Tobin took \r\nthe opposite position, making a plea that System policy should \r\nsimply be one of pushing on the aggregates hard enough to keep the \r\nbill rate steady to declining.\nProfessor Shapiro once again took a sanguine view of events. \r\nDismissing the recent Kaufman speech as \"utter, errant nonsense,\" he \r\nstated that most sectors are doing just about what was expected and \r\nthat the recovery is proceeding in an orderly manner. He is not yet \r\nconcerned with short-term rate levels and continues to predict a \r\nfall in long-term rates by the end of the summer. Shapiro cautions \r\nthe System to hew closely to a 5- to 6-percent M1 growth rate as its \r\nprimary objective for the year. Shapiro and Eckstein concur in their \r\nconviction that housing starts of close to 1.9 million units now \r\nseem assured for the year as a whole.\nProfessors Wallich and Samuelson were unavailable for comment this \r\nmonth.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-06-ph

"Beige Book Report: Philadelphia\nJune 2, 1971\nThe general mood of businessmen, bankers, and economists in the \r\nThird District is that the recovery is continuing but at a gradual \r\npace. Caution is still dominating inventory and plant and equipment \r\ndecisions. Some step-up in hiring plans is occurring at the \r\nmanufacturing level. On balance, inflationary expectations seem to \r\nbe somewhat stronger than they were a few weeks ago. Bankers expect \r\nlong-term rates to rise further. The mood of manufacturers in the \r\nThird District is generally optimistic. Most of them believe the \r\neconomy will continue to expand. For the immediate weeks ahead, they \r\nforecast an upward trend for new orders and sales. However, they \r\nremain cautious about building inventories and boosting outlays for \r\nnew plant and equipment.\nIncreased business activity apparently is beginning to have an \r\nexpansionary impact on hiring plans for District manufacturers. \r\nSince early 1970, more area manufacturers were laying off more \r\nworkers than they were hiring. For most of the second half of last \r\nyear, the percentage laid off was substantially greater than the \r\npercentage hired. This gap began to close earlier in 1971. For the \r\nlast two months, the number of manufacturing firms adding to their \r\npayrolls has equaled the number cutting back. Nearly four times the \r\nnumber of manufacturers who were polled plan to increase the number \r\nof employees six months from now as plan decreases.\nInflationary expectations, however, continue to be very much alive. \r\nOne director believes they are actually increasing. He says costs \r\nare rising rapidly and are exerting upward pressure on wholesale \r\nprices. Sooner or later, he says, prices at retail will begin \r\naccelerating again. There is fairly widespread acceptance of this \r\nview. Most businessmen that we talked with believe that inflation is \r\nstill the number one economic problem facing the nation.\nA sampling of business economists in the Philadelphia area indicates \r\nthat most are still forecasting a $1,045-1,050-billion GNP for 1971, \r\nwith an unemployment rate near 6 percent at year-end. There is some \r\ndisagreement, however, on the outlook for inflation. One group \r\nbelieves that a gradual recovery with lingering unemployment will be \r\nenough to dampen the pace of upward price movements. The other group \r\ncontends that wage-push pressures are simply too great to be \r\nchecked, even with the amount of excess capacity that is likely to \r\nprevail for the balance of the year.\nLoan demand at banks is still on a very modest upward path. Most \r\nbankers we talked with anticipate that long-term rates will move up \r\nfurther. The reasons cited most often are a continuation of rising \r\nloan demand and the belief that inflationary expectations will \r\nintensify rather than abate. One country banker said he feels so \r\nstrongly about higher rates that he wouldn't touch a 20-year \r\nmortgage for less than 8 1/2 percent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-06-bo

"Beige Book Report: Boston\nJune 2, 1971\nFirst District directors continue to express guarded optimism on the \r\nprogress of the recovery, noting that the slight improvement in \r\nconsumer spending first reported last month seems to be continuing. \r\nHowever, prospects for a significant slowing of inflation over the \r\nrest of 1971 are considered poor. In the financial sector, the gains \r\nnoted for the past several months seem to be coming to an end. At \r\nBoston, area thrift institutions' conventional mortgage rates have \r\neased back up toward 8 percent from their April low of 7 1/2 \r\npercent, and the large deposit inflows seem to be tapering off. \r\nCredit availability remains good, however, at thrift institutions, \r\ncommercial banks, and large area insurance lenders. Despite the \r\nvirtual disappearance of equity kickers and a drop in effective \r\nyield of more than 600 basis points over the last eight months, \r\ninsurance companies are finding commercial mortgage demand very \r\nsluggish.\nAt the recent joint meeting of the First and Second District Boards \r\nof Directors, a list of common questions was given to each attending \r\nmember to elicit their sentiment regarding the current business \r\noutlook. Among the five Boston directors responding to these \r\nquestions, there was near unanimity. All agreed that the greater \r\nconsumer willingness to spend reported a month ago seems to be \r\ncontinuing, with two of our directors further noting that this trend \r\nseems to be developing even in the area of luxury items. Four of the \r\nfive expressed their conviction that housing starts for the year can \r\nhold at a 1.9-million unit level and that the primary deterring \r\nfactor to gains beyond this level is inflated home prices. The fifth \r\nmember, active in both commercial and mutual savings banking, noted \r\nthat in his area sales seem to be proceeding well in spite of home \r\nprices.\nAll five directors agreed that capacity utilization levels-not high, \r\nlong-term rate levels-will determine spending on plant and equipment \r\nover the next several quarters and that the outlook thus remains \r\nsomewhat weak. Of the three directors answering a question on recent \r\ndevelopments in the employment situation, two saw no changes and a \r\nthird noted a tendency to slightly longer workweeks.\nCommenting to the recent update of the DRI Model forecast and \r\nsubsequent developments, Professor Eckstein stated that the leading \r\nindicators have become an absolute hodgepodge of contradictions and \r\nconvey no sense of direction at all to him. Consistent with the \r\nlatest DRI solution ($1,050-billion GNP for 1971), Eckstein noted \r\nthat the extra inflation comes at least partly at the expense of the \r\nreal GNP, a result he feels is descriptive of the real world in the \r\nshort to medium run. In spite of the recent reversals in rate \r\nlevels, Eckstein advised the System to concentrate on the growth \r\nrates of money stock and free reserves over the next quarter, \r\nshooting for something like a 7- to 8-percent annual rate of M1 \r\ngrowth. Consistent with his past prescriptions, Professor Tobin took \r\nthe opposite position, making a plea that System policy should \r\nsimply be one of pushing on the aggregates hard enough to keep the \r\nbill rate steady to declining.\nProfessor Shapiro once again took a sanguine view of events. \r\nDismissing the recent Kaufman speech as \"utter, errant nonsense,\" he \r\nstated that most sectors are doing just about what was expected and \r\nthat the recovery is proceeding in an orderly manner. He is not yet \r\nconcerned with short-term rate levels and continues to predict a \r\nfall in long-term rates by the end of the summer. Shapiro cautions \r\nthe System to hew closely to a 5- to 6-percent M1 growth rate as its \r\nprimary objective for the year. Shapiro and Eckstein concur in their \r\nconviction that housing starts of close to 1.9 million units now \r\nseem assured for the year as a whole.\nProfessors Wallich and Samuelson were unavailable for comment this \r\nmonth.\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/1971/1971-06-kc

"Beige Book Report: Kansas City\nJune 2, 1971\nBusinessmen continue to remain cautious on the economy. Steel \r\nstockpiling does not appear to be providing as strong an \r\nunderpinning to second quarter economic activity as was anticipated \r\nearlier. Although the supply of mortgage funds for financing \r\nresidential construction remains ample, the rate of deposit inflows \r\nis below the levels of earlier this year. One businessman is sure \r\nthe recent turnaround in interest rates will slow recovery, while \r\nanother thinks it represents a correction for an overly rapid \r\ndecline. Others feel that progress against inflation will be \r\nextremely difficult so long as monopoly power prevails to the extent \r\nthat it does. One of these rejects wage-price controls as \r\nunenforceable and ineffective because the cause is not treated. \r\nThus, considerable confusion exists as to what is happening and what \r\nneeds to be done.\nUsers and producers of steel indicate only modest stockpiling to \r\ndate. Some who are carrying larger-than-usual steel inventories give \r\nreasons other than, or in addition to, the likelihood of a strike. \r\nOne manufacturer blames lower-than-expected sales. Another claims to \r\nbe hedging against further price increases. Still another thinks a \r\nprolonged strike most unlikely, although he admits to buying steel \r\nahead\u2014just in case. One purchasing agent points to mill ads for \r\ncertain types of steel not normally available in shortage situations \r\nas evidence of little industrywide stockpiling. He adds that, if \r\nthere is not a strike, steel producers will be faced with a slow \r\nfourth quarter as users are evidently accumulating adequate \r\ninventories considering current rates of use.\nSteel producers and service centers throughout the District confirm \r\nthe reports of only light overall stockpiling by their customers. A \r\nmajor steel producer in the Denver area describes orders as \r\ndisappointing. He believes that steel demand is being held back by \r\nuncertainty in the economy and because steel companies are not \r\nproviding financing for 60 to 90 days this time as they have done \r\npreviously. A service center in Omaha says it is not doing much \r\nhedge buying because of the possibility of a construction strike in \r\nJune but may do a little after this uncertainty is resolved. Two \r\ncompanies in Oklahoma give similar reports of only light hedging. A \r\npair of steel distributors in Kansas City answered \"some\" to the \r\nquestion of steel stockpiling. One terms July an open-tonnage month, \r\nwith plenty of room for orders. This has not characterized past \r\nstrike-year patterns and gives users more room to hedge later, he \r\nsaid. The other pointed out that business is not such that firms are \r\nstockpiling in anticipation of strikes as in the past. Several of \r\nthose contacted pointed to foreign supplies of steel and supplies \r\nfrom independents unaffected by a strike as contributing to the \r\nreasons for little stockpiling.\nFarm machinery sales show some indications of improvement after two \r\nyears of sluggish activity. Within the Tenth District, however, the \r\nprospects remain somewhat mixed, as sales in those areas suffering \r\nfrom the current drought are not expected to improve over last year. \r\nIn fact, some decline seems likely. According to the machinery \r\ncompanies contacted, sales during the October-April period were \r\ngenerally disappointing\u2014running 5 to 10 percent below\nyear-earlier \r\nlevels. However, the companies indicated that sales have recently \r\npicked up sharply, as farmers moved into the spring planting season \r\nand began preparations for the wheat harvest. One company reported \r\nan 11-percent increase in combine sales, and all representatives \r\nstated that large tractors (l00+hp) have been moving especially \r\nwell. With the exception of the drought areas, the outlook is \r\ngenerally optimistic for the remainder of the year, with sales \r\nexpected to run moderately above 1970 levels. Much of the impetus \r\nfor this expected improvement arises from the more flexible planting \r\nfeatures of the new farm program, easier credit conditions, \r\nrelatively high grain prices, and the deferred buying actions taken \r\nby farmers during the past two years.\nThe demand for mortgage credit has been heavy during the past few \r\nmonths throughout the Tenth District, except in areas where layoffs \r\nhave been particularly high and have dampened consumer enthusiasm. \r\nDemand for funds to finance the purchase and construction of single-\r\nfamily units remains strong. The apparent bottoming out of interest \r\nrates has added some boost to demand, encouraging borrowers to go \r\nahead with their home buying plans rather than wait for lower \r\ninterest rates. However, the demand for funds may be slackening \r\nsomewhat in the multi-family area.\nSome increases in mortgage lending rates have occurred during recent \r\nweeks. In line with national developments, the points charged on \r\nFHA-VA insured mortgages have increased from the 2.5-3 to the 4-5 \r\narea during the past two weeks. In some cases, conventional mortgage \r\nrates have ticked up a notch. The prevailing rate on an 80-percent \r\nconventional loan is 7 1/2 percent (plus 1 percent origination fee).\nThe supply of mortgage funds for purchase and construction of \r\nconventional single-family units remains quite ample. Savings and \r\nloan associations report continuing strong deposit flows and \r\nmortgage commitments continue to rise. However, the rate of deposit \r\ninflows is below that which occurred earlier in the year. Savings \r\nand loan associations are responding by reducing their purchases of \r\nFHA-VA mortgages in the secondary market. This slowing of funds \r\nflowing into the secondary market is causing problems for some \r\nmortgage companies caught without commitments. In the multi-family \r\narea, the supply of funds has tightened in some cases due to the \r\nfeeling on the part of the lenders that some overbuilding may be \r\noccurring in this area.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-06-ph

"Beige Book Report: Philadelphia\nJune 2, 1971\nThe general mood of businessmen, bankers, and economists in the \r\nThird District is that the recovery is continuing but at a gradual \r\npace. Caution is still dominating inventory and plant and equipment \r\ndecisions. Some step-up in hiring plans is occurring at the \r\nmanufacturing level. On balance, inflationary expectations seem to \r\nbe somewhat stronger than they were a few weeks ago. Bankers expect \r\nlong-term rates to rise further. The mood of manufacturers in the \r\nThird District is generally optimistic. Most of them believe the \r\neconomy will continue to expand. For the immediate weeks ahead, they \r\nforecast an upward trend for new orders and sales. However, they \r\nremain cautious about building inventories and boosting outlays for \r\nnew plant and equipment.\nIncreased business activity apparently is beginning to have an \r\nexpansionary impact on hiring plans for District manufacturers. \r\nSince early 1970, more area manufacturers were laying off more \r\nworkers than they were hiring. For most of the second half of last \r\nyear, the percentage laid off was substantially greater than the \r\npercentage hired. This gap began to close earlier in 1971. For the \r\nlast two months, the number of manufacturing firms adding to their \r\npayrolls has equaled the number cutting back. Nearly four times the \r\nnumber of manufacturers who were polled plan to increase the number \r\nof employees six months from now as plan decreases.\nInflationary expectations, however, continue to be very much alive. \r\nOne director believes they are actually increasing. He says costs \r\nare rising rapidly and are exerting upward pressure on wholesale \r\nprices. Sooner or later, he says, prices at retail will begin \r\naccelerating again. There is fairly widespread acceptance of this \r\nview. Most businessmen that we talked with believe that inflation is \r\nstill the number one economic problem facing the nation.\nA sampling of business economists in the Philadelphia area indicates \r\nthat most are still forecasting a $1,045-1,050-billion GNP for 1971, \r\nwith an unemployment rate near 6 percent at year-end. There is some \r\ndisagreement, however, on the outlook for inflation. One group \r\nbelieves that a gradual recovery with lingering unemployment will be \r\nenough to dampen the pace of upward price movements. The other group \r\ncontends that wage-push pressures are simply too great to be \r\nchecked, even with the amount of excess capacity that is likely to \r\nprevail for the balance of the year.\nLoan demand at banks is still on a very modest upward path. Most \r\nbankers we talked with anticipate that long-term rates will move up \r\nfurther. The reasons cited most often are a continuation of rising \r\nloan demand and the belief that inflationary expectations will \r\nintensify rather than abate. One country banker said he feels so \r\nstrongly about higher rates that he wouldn't touch a 20-year \r\nmortgage for less than 8 1/2 percent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-06-cl

"Beige Book Report: Cleveland\nJune 2, 1971\nThis report is based on information obtained from about 50 \r\neconomists who attended a regularly scheduled meeting of the Fourth \r\nDistrict Business Economists' Round Table held at the Federal \r\nReserve Bank of Cleveland on May 27, 1971. The consensus forecast \r\nfor the remainder of 1971 that emerged from this meeting indicated \r\nmoderate real growth, continued high unemployment, and only a modest \r\nimprovement in the rate of inflation. In general, the group's \r\noutlook was changed little from the projections presented at our \r\nprevious meeting on January 29, 1971.\nThe group's median forecast of current dollar GNP for 1971 was \r\nrevised slightly upward from $1,045 billion to $1,050 billion. \r\nHowever, their estimate of the GNP deflator was also increased from \r\na year-to-year gain of 4.2 percent to 4.7 percent. Thus, real growth \r\nfor the year is still estimated to be only 2.7 percent. Moreover, \r\nseveral members expected an acceleration in the Consumer Price Index \r\nto a 4-percent annual rate during the second half of 1971, \r\nreflecting higher food prices and upward pressure on mortgage \r\ninterest rates. With only moderate real growth anticipated, the \r\nbusiness economists remained generally pessimistic about the \r\nprospects of any appreciable improvement in the recent\n6-percent \r\nlevel of unemployment in 1971.\nThe majority of the economists noted that the strengthening of \r\neconomic activity in the first quarter was generally in line with \r\ntheir expectations. Discounting the effects of the rebound from the \r\nauto strike and other distorting influences in the first quarter, \r\nthe recovery of overall economic activity was moderate. Most of the \r\nunderlying strength in the first quarter was centered in the \r\ninterest rate sensitive areas of residential construction and state \r\nand local government spending. A large number of the Round Table \r\nmembers indicated concern that further increases in interest rates \r\nmight choke off a continued expansion in these sectors later this \r\nyear. Several economists asserted that mortgage rates have \r\napparently bottomed out at relatively high levels, and \r\nrepresentatives of several large commercial banks reported that the \r\nprospects for increases in the prime rate\u2014to perhaps 6 to 6 1/2 \r\npercent by the end of this year\u2014are strong.\nThe group did not foresee any significant improvement in the rate of \r\nbusiness spending this year; therefore, the strength of the recovery \r\nin the months ahead will depend increasingly upon consumer spending. \r\nMost of the economists noted scattered evidence of improvement in \r\nconsumer spending; however, no major surge in consumer spending was \r\nanticipated for the balance of this year. The group was encouraged \r\nby retail sales in March, April, and so far in May. Moreover, since \r\nthe fourth quarter of 1970, the advance in retail sales has become \r\nmore broadly based, reflecting some pickup in such hard goods as \r\nfurniture and appliances. The rate of new car sales, however, is \r\nexpected to decline following the first quarter post-strike rebound. \r\nThe median forecast of domestic new car sales in 1971, submitted by \r\nten economists associated with the automotive, steel, and rubber \r\nindustries, has been reduced slightly since the January meeting to \r\nan annual rate of 8.5 million units. Estimates of imported car \r\nsales, however, have been increased by approximately 300,000 units \r\nto a level of 1.5 million units. In total, retail sales are expected \r\nto rise 8 percent in 1971.\nSeveral steel industry economists reported that recent developments \r\nwithin their industry closely resemble the patterns experienced \r\nprior to the expiration of the labor contract in 1968. However, the \r\nsteel inventory build-up in 1971 is expected to be about one-half \r\nmillion tons less than in 1968, because the economy was weaker at \r\nthe beginning of 1971 and inventories held by steel consumers were \r\nmuch higher than in 1968. The median forecast for steel indicates \r\ndomestic steel consumption of 102.4 million tons, domestic steel \r\nshipments of 93.6 million tons, and steel ingot production of 132.2 \r\nmillion tons. New orders for steel reached a peak early this year, \r\nand it is expected that production and shipments will peak in May \r\nand June, respectively.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-06-ri

"Beige Book Report: Richmond\nJune 2, 1971\nRecent surveys of businessmen and bankers in the Fifth District \r\nindicate general agreement on the following points: (1) in \r\nmanufacturing, reduced backlogs of orders with slight improvements \r\nin shipments and new orders; (2) substantial increases in \r\nmanufacturing wages; (3) continued improvement in retail sales \r\nincluding automobiles; (4) substantial increases in loan demand, \r\nparticularly business and mortgage loans; and (5) decreased optimism \r\nregarding future business conditions.\nImprovements reported last month in District manufacturing have \r\ncontinued. Survey respondents indicated an increase in shipments and \r\nvolume of new orders. Backlogs of orders, after showing a \r\nsignificant improvement in April, declined during May, according to \r\nrespondents.\nDistrict bankers and retailers report improved retail sales. \r\nAccording to bankers, however, automobile sales were not up as much \r\nas they were in the previous month. Declines in inventories were \r\nreported by both manufacturers and retailers.\nManufacturers reported a slight improvement in employment. Very few \r\nrespondents indicated increases in employment, but the number \r\nreporting decreases was lower than in the previous period. There was \r\na slight increase in the number of bankers reporting decreases in \r\ntheir areas. District retailers report improvement in the employment \r\nsituation.\nRetailing and manufacturing respondents indicated continued \r\nincreases in prices received. Upward pressures on wages continued, \r\nwith more than one-half of the respondents in manufacturing and \r\nretailing and services reporting increased wage costs.\nThe construction sector of the Fifth District economy continues to \r\nbe strong. Both residential and nonresidential construction showed \r\nsubstantial improvement in the District during the reporting period.\nRespondents indicated that the demand for all types of loans \r\nincreased in May. More than four-fifths of the bankers reporting \r\nindicated an increase in the demand for mortgage loans, and more \r\nthan one-half reported increased demand for business and consumer \r\nloans.\nDistrict cash receipts from farm marketings continue to run below \r\nthose of a year ago, although the decline is not as great as it was \r\nearlier in the year. Total cash receipts during the first quarter \r\nwere 5 percent below those in the same period a year earlier. An 8-percent decline in livestock receipts more than offset a 7-percent \r\nincrease in receipts from crops.\nAlthough optimism has declined somewhat since the last survey, \r\nrespondents remain optimistic on balance. Increased activity in \r\nconstruction\u2014both residential and nonresidential\u2014and in retail sales \r\naccounts for this guardedly optimistic outlook.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-06-ch

"Beige Book Report: Chicago\nJune 2, 1971\nThe moderate improvement in sentiment noted a month ago is still \r\nevident. But signs of a vigorous uptrend, except in residential \r\nbuilding, remain elusive. Job markets appear to have stabilized, \r\nwith some scattered rehirings, but students and teachers are \r\nswelling the number of job seekers. Prospects are even less \r\nfavorable than earlier for a significant diminution of upward price \r\npressures. Demand for long-term funds remains strong, but demand for \r\nbank loans continues weak, although commitment volume has picked up \r\nsharply. There is no indication that the economy will again slide \r\ninto a slump, but the reversal of the build-up in steel inventories \r\nafter July and the ending of other temporary stimuli are expected to \r\ndampen the business uptrend. Looking ahead to 1972, a broadly based \r\nrecovery is widely anticipated.\nOrders have improved moderately for a variety of consumer goods, \r\ncapital goods, components, and materials in the past several weeks. \r\nIn almost all sectors, however, the order lead time remains very \r\nshort. Nevertheless, stronger demand has encouraged price increases \r\nfor such items as steel, nonferrous metals, building materials, \r\nplastics, and chemicals.\nInventories of most items are said to be well in line with \r\nrequirements. Exceptions are extra holdings of steel, aluminum, and \r\ncopper, awaiting strike developments. Many manufacturers have \r\nreduced goods-in-process inventories.\nThe outlook remains bleak for capital equipment generally. Farm \r\nequipment sales are reported to have improved recently, but data for \r\nfirst quarter show a large deficit from a year ago. The picture on \r\nconstruction-related equipment is mixed, with greatest strength in \r\nexports and mining equipment. The only really vigorous demand is for \r\nequipment related to pollution control.\nSteel orders have slowed down to a level below shipments. \r\nNevertheless, some transportation problems are beginning to hamper \r\ndeliveries to steel users. On steel strike possibilities, it is \r\ngenerally recognized that the terms incorporated in the auto, can \r\n(and now, aluminum) settlements should set the pattern for \r\nagreement. Nevertheless, local problems and militant leaders may \r\nforce a strike.\nConcern about foreign competition continues to rise\u2014in steel, \r\nmachinery, and consumer goods. Some producers who used to emphasize \r\nan all-American product are developing or are seeking foreign \r\nsources for components (even including such bulky items as \r\ncastings).\nThe current auto sales picture is clouded by effects of sales \r\nincentive programs. Inventories are now about right. Total sales of \r\n9.8 million cars (including 1.5 million imports) will require strong \r\ndemand for 1972 models.\nWith few exceptions, bankers continue to report demand for business \r\nloans as slow and disappointing. But there has been a sharp pickup \r\nin demand for firm commitments\u2014paid for by fees or balances. Lines \r\nof credit, term loans, and revolving credit are all mentioned. Most \r\nof these commitments reflect a desire for insurance against future \r\nstringencies, because there is little indication that funds will be \r\nrequired in the near future. With slow business loan demand, banks \r\nare showing increased interest in mortgages, consumer credit, and \r\nbroker loans.\nMore bankers, especially in Michigan, are investigating the \r\nadvantages of holding companies and possible acquisitions of \"bank-related\" enterprises.\nInflows to bank savings accounts are reported to have slackened in \r\nrecent weeks. CD money is not being sought aggressively. Savings \r\ninflows to S&Ls, however, remain very strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-06-ch

"Beige Book Report: Chicago\nJune 2, 1971\nThe moderate improvement in sentiment noted a month ago is still \r\nevident. But signs of a vigorous uptrend, except in residential \r\nbuilding, remain elusive. Job markets appear to have stabilized, \r\nwith some scattered rehirings, but students and teachers are \r\nswelling the number of job seekers. Prospects are even less \r\nfavorable than earlier for a significant diminution of upward price \r\npressures. Demand for long-term funds remains strong, but demand for \r\nbank loans continues weak, although commitment volume has picked up \r\nsharply. There is no indication that the economy will again slide \r\ninto a slump, but the reversal of the build-up in steel inventories \r\nafter July and the ending of other temporary stimuli are expected to \r\ndampen the business uptrend. Looking ahead to 1972, a broadly based \r\nrecovery is widely anticipated.\nOrders have improved moderately for a variety of consumer goods, \r\ncapital goods, components, and materials in the past several weeks. \r\nIn almost all sectors, however, the order lead time remains very \r\nshort. Nevertheless, stronger demand has encouraged price increases \r\nfor such items as steel, nonferrous metals, building materials, \r\nplastics, and chemicals.\nInventories of most items are said to be well in line with \r\nrequirements. Exceptions are extra holdings of steel, aluminum, and \r\ncopper, awaiting strike developments. Many manufacturers have \r\nreduced goods-in-process inventories.\nThe outlook remains bleak for capital equipment generally. Farm \r\nequipment sales are reported to have improved recently, but data for \r\nfirst quarter show a large deficit from a year ago. The picture on \r\nconstruction-related equipment is mixed, with greatest strength in \r\nexports and mining equipment. The only really vigorous demand is for \r\nequipment related to pollution control.\nSteel orders have slowed down to a level below shipments. \r\nNevertheless, some transportation problems are beginning to hamper \r\ndeliveries to steel users. On steel strike possibilities, it is \r\ngenerally recognized that the terms incorporated in the auto, can \r\n(and now, aluminum) settlements should set the pattern for \r\nagreement. Nevertheless, local problems and militant leaders may \r\nforce a strike.\nConcern about foreign competition continues to rise\u2014in steel, \r\nmachinery, and consumer goods. Some producers who used to emphasize \r\nan all-American product are developing or are seeking foreign \r\nsources for components (even including such bulky items as \r\ncastings).\nThe current auto sales picture is clouded by effects of sales \r\nincentive programs. Inventories are now about right. Total sales of \r\n9.8 million cars (including 1.5 million imports) will require strong \r\ndemand for 1972 models.\nWith few exceptions, bankers continue to report demand for business \r\nloans as slow and disappointing. But there has been a sharp pickup \r\nin demand for firm commitments\u2014paid for by fees or balances. Lines \r\nof credit, term loans, and revolving credit are all mentioned. Most \r\nof these commitments reflect a desire for insurance against future \r\nstringencies, because there is little indication that funds will be \r\nrequired in the near future. With slow business loan demand, banks \r\nare showing increased interest in mortgages, consumer credit, and \r\nbroker loans.\nMore bankers, especially in Michigan, are investigating the \r\nadvantages of holding companies and possible acquisitions of \"bank-related\" enterprises.\nInflows to bank savings accounts are reported to have slackened in \r\nrecent weeks. CD money is not being sought aggressively. Savings \r\ninflows to S&Ls, however, remain very strong.\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/1971/1971-05-sl

"Beige Book Report: St Louis\nMay 5, 1971\nThe upward trend of business in the Eighth District accelerated \r\nsomewhat during the past month, according to reports from a group of \r\nleading businessmen. Retail sales picked up considerably in the week \r\nbefore Easter and have continued at the higher level. The \r\nconstruction industry shows more activity than a month ago on a \r\nseasonally adjusted basis and is well above levels of a year ago. \r\nAlthough cautious about additional hiring, employers are lengthening \r\nthe workweek in many cases and are attaining increased .efficiencies \r\nwith the current number of employees. No further reductions in \r\ncapital spending are mentioned, and some signs of recovery in such \r\nspending are beginning to appear. Despite some dry weather in \r\nportions of the District, the overall agricultural outlook is good.\nRetail sales rose sharply just prior to Easter in a manner similar \r\nto the pre-Christmas gain. Clothing, appliances, and other lines \r\nappear to be moving well. Automobile demand is strong. Retail \r\ninventories have not been increased, but some respondents indicate \r\nthat larger inventories will be required if demand continues at \r\ncurrent high levels.\nThe construction outlook has likewise improved during the past \r\nmonth. Gains are now observable in all sectors of the industry, \r\nincluding public buildings, industrial construction, and all types \r\nof housing, especially lower cost homes which are financed in part \r\nthrough public assistance. The residential housing market is soft in \r\nSt. Louis, where major wage gains were negotiated by the building \r\ntrades. In most other areas of the District, however, home \r\nconstruction labor is nonunion, and home building has picked up \r\nsubstantially. One major industrial construction firm reports that \r\nactual work is still lagging behind expectations, but contract \r\nclosing, which involve future construction, are well ahead of year-ago levels. This firm is in the process of enlarging its staff to \r\nmeet this increased demand. Orders for building supplies continue to \r\nimprove along with the construction gains.\nThe process of investment retrenchment which began last year has \r\nbeen completed, and firms are beginning to seek new investment \r\nopportunities. One large, diversified firm reports renewed \r\ninvestment plans in all divisions except one of its minor franchised \r\nlines. Another respondent is putting additional machinery into use \r\nto meet increased demand. Some others are adopting a \"wait-and-see\" \r\nattitude until evidence of an upswing is more conclusive.\nExcluding some gains in construction employment, most of the \r\nincrease in activity to date has apparently been made with little \r\nchange in the number of workers. A slightly longer workweek and \r\ngreater productivity per worker are indicated. Even those firms \r\nreporting increased investment do not foresee additional hiring in \r\nthe near future. The outlook for summer employment of students and \r\nother part-time workers is especially dim.\nLabor costs are still a major complaint, especially in the \r\nconstruction industries. Suppliers of building materials in St. \r\nLouis indicate that competition from nonunion firms in other parts \r\nof the county is causing them to hold prices down, resulting in a \r\nprofit squeeze.\nThe rise in business activity in the District is beginning to have \r\nan impact on credit demand. Loans at most District member banks have \r\nincreased somewhat faster in recent weeks than heretofore. A few \r\nbanks have increased their prime rates, although they generally \r\nremain highly liquid. Savings and loan associations report that \r\nliquidity is greater than desirable but that demand for mortgage \r\nmoney has risen substantially during the past month.\nThere are fewer complaints than usual about the current rate of \r\ninflation, but a number of respondents express concern that overly \r\nexpansive public policies may again lead to excessive demand and an \r\nincreased rate of inflation.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-05-bo

"Beige Book Report: Boston\nMay 5, 1971\nApril redbook calls to First District directors produced the first \r\nhard evidence of improved business conditions. Such reports were \r\nscattered, however, and the majority of our respondents continue to \r\nreport the moderate pace of retail and industrial activity which has \r\npredominated since last winter.\nArea financial institutions present an essentially unchanged picture \r\nfrom a month ago. Savings and time deposit flows continue at high \r\nlevels. Further cuts on passbook savings have appeared in some \r\nlocalities but, with the exception of Providence, R. I., major \r\nregional commercial and mutual savings banks have not yet moved on \r\ndeposit rates. The flurry or mortgage rate cuts observed during \r\nMarch seems to have slowed considerably in the last month. Mortgage \r\ndemand is reported as running at brisk levels.\nRetail sales activity in New England seems to have picked up some \r\nover the last month. The consumer has by no means \"broken out\", \r\nhowever, and the continued impression is given of extreme consumer \r\ncost consciousness. Autos constitute an important exception to this \r\nsituation, with respondents in several areas reporting dealer \r\nsatisfaction with April sales levels.\nOne of our directors who heads a large and highly diversified \r\nconglomerate was able to report a substantial improvement in sales \r\nand order levels in virtually every division during April. Most of \r\nhis corporate divisions, including producers of aircraft, \r\nrecreational boats, heavy engines, and capital goods equipment, are \r\nnow running above 1971 projections for the year to date. Our other \r\ndirectors cognizant of industrial and manufacturing activity could \r\nreport no such hard evidence of improving demand conditions, \r\nhowever, and reported April results as only marginally better than \r\nthe February-March period.\nProfessor Otto Eckstein' s updated DRI forecast places 1971 GNP at \r\n$1,048 billion, edging as high as $1,052 billion should consumer \r\nspending attitudes change. The basic point which Eckstein wished to \r\nstress in this month's commentary is that the current economic \r\noutlook is virtually unchanged from December. Recent developments, \r\nincluding the first quarter GNP figures, are right on track with the \r\nforecasts made as early as November, and nothing materially \r\ndifferent has yet emerged to warrant increased optimism from year-end levels. Eckstein also noted that the last 1972 employment \r\noutlook is extremely bearish, when one considers the normal growth \r\nof the labor force over the intervening period plus the need to re-employ those who have lost work in the last eighteen months. Added \r\nto this will be the influx of returning servicemen from Vietnam. All \r\ntold, nearly 4 1/2 million jobs would be needed in the next eighteen \r\nmonths to approach 5 percent unemployment by the end of 1972. Given \r\nthis situation, Eckstein suggests that there is little potential for \r\nharm if monetary policy errs on the side of too much stimulus in the \r\ncoming months.\nProfessor Tobin expressed no surprise at the first quarter GNP \r\nfigures, nor does he find much comfort in them. He took strong issue \r\nwith the notion that we're currently in a liquidity trap, stating \r\nthat a liquidity excess in conjunction with a 5 1/2 percent prime \r\nrate would certainly be an historical oddity. Tobin stressed again \r\nhis view that further monetary ease would likely produce both \r\nconsumption and residential construction benefits later this year, \r\nas well as a stimulus to plant and equipment spending during 1972.\nProfessors Shapiro and Wallich share a very similar outlook \r\ncurrently. Both noted their conviction that a broad-based consumer \r\nresurgence has begun, and that personal savings rates will continue \r\nto fall over the rest of the year, adding strength to the economy. \r\nThey also expressed continued optimism over the prospects for long-\r\nterm rate declines over the summer, although Shapiro noted that the \r\nrecent rise in the prime rate will probably postpone this \r\ndevelopment by a month or six weeks. Both Wallich and Shapiro share \r\nthe general view that first-quarter monetary stimulus appears to \r\nhave been excessive, and that adjustments should now be made toward \r\nlimiting Ml growth for the year to 6 percent.\nProfessor Samuelson was unavailable for comment this month.\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/1971/1971-05-kc

"Beige Book Report: Kansas City\nMay 5, 1971\nEconomic conditions in the District apparently are continuing to \r\nimprove. Businessmen that were surveyed expressed reserved optimism \r\nabout future prospects. Although sales at retail stores and auto \r\ndealers are somewhat higher than a year ago, much of this optimism \r\nis based on reports of a turnaround in the national economic \r\nsituation and on surveys which suggest that consumer attitudes have \r\nbecome more favorable to buying. Construction activity continues to \r\npace the area economy. Dry weather has severely damaged crops in the \r\nsouthern part of the District, but production prospects remain \r\nfavorable in most other areas. The employment situation is still \r\nsoft and only modest improvement is expected in coming months. Loan \r\ndemand continues to display a slight firming trend at District \r\nbanks, and deposit inflows continue strong. The prime rate increase \r\nwas generally followed throughout the District, although some banks \r\ndelayed their announcements.\nA survey of large retail stores in the District indicates that \r\nretail sales so far this year are slightly ahead of the same period \r\na year ago. With Easter late this year, April sales have been quite \r\ngood and many retailers said that they were better than expected. It \r\nappears from the responses that consumers have not begun to increase \r\ntheir buying of big ticket items significantly. A couple of stores \r\ndid indicate that their furniture sales were very good. Also, there \r\nhave been reports that color TV sets have sold well this year. \r\nRetail sales in Wichita are still poor, due to the high unemployment \r\nin the local aircraft industry. Stores in Colorado say that their \r\nsales have been very good. In Oklahoma, despite reports of increased \r\nconsumer caution in some areas, due to drought conditions, retail \r\nsales in Oklahoma City and Tulsa were said to be increasing. \r\nOptimism among merchants in the District was widespread. Many cited \r\nthe improved April figures as support for this optimism. But as \r\nnoted earlier, many drew their optimism from developments on the \r\nnational level. Some said that they were heartened by recent \r\nconsumer surveys. One retailer said that the improved foreign \r\npolitical climate would probably affect consumer buying attitudes \r\nfavorably. No one seemed to expect that there would be any great \r\nsurge of buying, but, instead, a gradual increase throughout the \r\nrest of the year.\nAuto sales have improved in recent months throughout the District. \r\nReports on sales in recent weeks are mixed, although several dealers \r\ndid report a pickup in momentum. The happiest dealers are those \r\nhandling imports. Buyers still seem to be interested in smaller and \r\ncheaper models. One dealer reported that a significantly large \r\nproportion of cars sold are cheaper models with less equipment. \r\nGenerally, dealers were optimistic about auto sales in future \r\nmonths. One dealer said that lower bank rates on auto loans were \r\nstarting to help sales. Again, the expectation is for a gradual, \r\nrather than a rapid, increase in sales.\nThe drought conditions prevailing in the central part of the United \r\nStates have had an effect on District agriculture. In Oklahoma, 99 \r\nper cent of the winter wheat crop is reported to be in poor to fair \r\ncondition. In the hardest hit southwestern part of the state many \r\nfields have been abandoned and grazed out with cattle. Native \r\npastures are in very poor condition. It is also reported that 80 per \r\ncent of the dryland wheat in New Mexico has been lost. Although some \r\nrain fell in these areas during the past week, the outlook remains \r\nbleak unless additional precipitation is received soon. Dry soil \r\nconditions have also affected parts of Colorado, Kansas, and \r\nMissouri, but losses have not been nearly as great as farther south. \r\nWyoming and Nebraska have good moisture conditions.\nThe slight firming in loan demand reported in March appears to have \r\nheld at Tenth District banks. Construction loan demand remains the \r\nmajor area of strength. Auto loan demand is also continuing to show \r\nstrength, although not as much as would be indicated by auto sales. \r\nBuyers are apparently making unusually large down payments. Some \r\npickup was reported in other consumer installment loans, but not \r\nmuch.\nBusiness loan demand for national concerns remains sluggish. Some \r\nbankers report that some national accounts have requested larger \r\ncredit lines, but have not used them as yet. Demand from local \r\nborrowers continues to show moderate strength. The increase in the \r\nprime rate was welcomed by bankers interviewed; it was justified \r\nmore by deposit rate levels than by strengthening loan demand.\nDeposit inflows continue strong at District banks, considering \r\nseasonal factors. In March, some banks were anticipating a decline \r\nin rates paid on consumer time deposits and some scattered declines \r\nhad occurred. This picture has changed somewhat. In some cases, \r\nthose declines that occurred earlier have been reversed, and rates \r\nhave firmed. There is less talk of declines in rates paid on \r\nconsumer time deposits; however, such talk has not disappeared. In \r\ngeneral, bankers continue to expect a gradual strengthening in loan \r\ndemand as a result of increased economic activity, and are reluctant \r\nto discourage deposit growth at this time.\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/1971/1971-05-sf

"Beige Book Report: San Francisco\nMay 5, 1971\nThere has been no major change in the pace of economic activity in \r\nthe view of businessmen and bankers in the Twelfth District. The \r\neconomy is in a period of gradual expansion, but the general outlook \r\nis one of caution. This caution is reflected in reports that no \r\npronounced rebuilding of inventories is under way. Businessmen seem \r\nto be awaiting a stronger rate of expansion before committing \r\nthemselves to carrying heavier inventories.\nHousing and related forest product industries are showing the most \r\nconsistent expansion. Housing construction, especially residential, \r\nis to increase, and there also are reports of a more active market \r\nin sales of existing homes. Part of this activity is due to lower \r\nmortgage rates. On the other hand, vacancies are high in some areas \r\nfor some industrial property. One banker in southern California \r\nnotes a significant vacancy factor in industrial and commercial \r\nproperties.\nThere is little evidence that businesses are rebuilding their \r\ninventories to any degree. This is the general feeling of our Head \r\nOffice and Branch directors who were asked to comment on this \r\nquestion. There are exceptions but, overall, their impression is \r\nthat businesses are continuing to hold inventories at present \r\nlevels. The one major exception is in steel and related production, \r\nwhere the possibility of a strike is generating heavier orders. \r\nInventories of building materials and some kinds of lumber also are \r\nbeing increased in expectation of a higher rate of construction. \r\nRetailers seem to be increasing inventories only moderately, and \r\nauto dealers have completed their post-strike restocking. In \r\nsummary, optimism about the general economy is not appearing in \r\nattitudes about inventories.\nRetail sales are rising at a moderate pace. Major chain stores, in \r\nparticular, are doing quite well in most areas through heavy \r\npromotional efforts. In Arizona and eastern Washington, average \r\nincreases of 12 to 20 percent over the same period of last year are \r\nreported. Despite these exceptions, consumers are cautious in their \r\nbuying and retailers expect no major jump in consumer spending.\nReports from agricultural sections of the District indicate a \r\nsatisfactory level of prices. Cold storage facilitates for local \r\nfruits and vegetables are being expanded in eastern Washington. Good \r\nwheat crops are expected in Idaho and Washington. Similarly, \r\nprospects for agriculture in the central valley of California have \r\nimproved, as prices have risen for most crops and dairy products. \r\nIdaho agriculture does have a problem, however, in the large carry-over from last year's potato crops. Much of this is still in \r\nstorage, and potato prices are expected to be lower.\nBankers continue to devote efforts to expanding their loans, \r\nespecially commercial and industrial loans, as their deposits have \r\ncontinued to rise. Rates paid on time and saving deposits show \r\nconsiderable variation from bank to bank. Some banks have kept the 4 \r\n1/2 percent rate on passbook accounts. Usually, these have been \r\nsmaller banks, although some quite large banks have maintained their \r\nrates. Some banks report a shift from time CD's into consumer-type \r\nsavings instruments, and they have increased slightly their CD \r\nrates. Demand deposits are higher for most banks. Savings and loan \r\nassociations are also gaining funds and, in consequence, mortgage \r\nmoney is readily available in most parts of the District.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-05-ri

"Beige Book Report: Richmond\nMay 5, 1971\nDiffusion indexes obtained from recent surveys of businessmen and \r\nbankers in the Fifth District indicate general agreement on the \r\nfollowing points: (1) increased shipments and backlog of orders in \r\nmanufacturing, but no change in new orders; (2) further slight \r\nimprovement in retail sales including automobiles; (3) very slight \r\nimprovement in the District employment situation; (4) further \r\nadvances of prices in the manufacturing sector; (5) sharp \r\nimprovement in both residential and nonresidential building \r\nactivity; (6) increasing strength in loan demand at District banks; \r\nand (7) a substantially improved outlook regarding future business \r\nconditions.\nDistrict manufacturers report that their activities are continuing \r\nthe improvement which began in February. They report on balance that \r\nshipments increased in April, while no significant change occurred \r\nin the volume of new orders. Backlogs of orders increased according \r\nto important producers in such industries as coal, building \r\nmaterials, containers, fabricated metal products, nonferrous metals, \r\nand chemicals.\nRetail sales of goods and services improved further during the past \r\nfour weeks, according to most reports from District bankers and \r\nretailers. Bankers' reports also indicate that automobile sales \r\ncontinued to advance in the District during April. Most \r\nmanufacturers and retailers in the survey report some recent decline \r\nin their inventory levels.\nSuggestions of an improving employment situation continue to be made \r\nby District manufacturing respondents. Although few reports of \r\nincreasing employment have been received from manufacturing \r\nindustries, the number which indicate further declines continues to \r\ndrop. The number of District bankers who report improvement in the \r\nemployment situation in their respective areas has increased in the \r\npast two months, by comparison with the last half of 1970 and the \r\nfirst two months of 1971. Supplies of available labor apparently \r\ncontinue to be adequate, however, in most parts of the District, \r\nexcept for certain types of skilled labor.\nAccording to many manufacturing respondents, the backup of \r\nmanufacturers' prices noted last month is continuing. Recent price \r\nadvances are reported by manufacturers in textiles, synthetic \r\nfibers, chemicals, furniture, fabricated metal products, and \r\nnonferrous metals. Upward pressure on wages in manufacturing \r\nindustries is reportedly continuing; most retailers and respondents \r\nin the services industries also report prices continuing to climb.\nResidential construction apparently continues to advance in the \r\nDistrict at a rapid pace. The majority of banking respondents in the \r\nmajor cities of all District states indicate a continuing surge of \r\nresidential building. Bankers also report on balance that \r\nnonresidential construction, which had tapered off since the first \r\nof the year, began to recover in April.\nThe number of banking respondents indicating increased loan demand \r\nrose sharply in April. On balance, bankers report that demand for \r\nconsumer loans and mortgage loans has grown during the past four \r\nweeks. Business loan demand, which had been considerably weaker, is \r\nalso increasing, according to a considerable majority of banking \r\nrespondents.\nThe recent District survey showed the highest level of respondent \r\noptimism in several months. Comments received from reporters \r\nindicate that the recent round of relatively favorable business and \r\neconomic news is confirmed in the outlook of respondents in the \r\nFifth District. Comments from manufacturing respondents indicate \r\nsome anticipation of increased production levels in the months \r\nahead, and suggest the possibility that current plans for the \r\nexpansion of plant and equipment might be too low. An attitude of \r\ncautiousness continues to characterize many District respondents, \r\nbut a quickening undercurrent of optimism is evident.\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/1971/1971-05-ny

"Beige Book Report: New York\nMay 5, 1971\nA distinctly rosier picture of consumer spending than that painted a \r\nmonth ago emerged from the views expressed by the Directors of this \r\nBank and of the Buffalo Branch, and other business leaders. With \r\nsome exceptions, however, business confidence outside of the retail \r\narea was less than strong. Nevertheless, the implementation at this \r\ntime of fiscal measures to stimulate the economy were generally \r\nopposed, reflecting concern over the continued presence of inflation \r\npressures. The President's program to curb the rise in cost in the \r\nconstruction industry was given little or no chance of success.\nWith respect to consumer spending, the Chairman of the Board of a \r\nlarge retail chain that includes a number of sizable department \r\nstores, and a large diversified apparel manufacturing business, was \r\nvery optimistic. He reported a sharp increase in his firm's sales in \r\nrecent weeks both through its own outlets as well as to other major \r\nretailers, and felt that the consumer had finally \"turned loose\". \r\nThe vice president of another large retail chain reported that his \r\nfirm's business had picked up somewhat in the past month, and that \r\nhe looked for a good increase in the months ahead. Similar \r\nsentiments were expressed by the president of a relatively high \r\npriced New York City department store with branches in the suburbs, \r\nwhile the president of a large medium priced store felt there had \r\nbeen a definite improvement in recent weeks, and assessed retail \r\nsales prospects with \"restrained optimism\". Several presidents of \r\nupstate banks saw an upsurge in consumer confidence, while the \r\npresident of a textile firm stated that his retail store customers \r\nwere building up inventories of his firm's products. Indeed, with \r\nvarying degrees of enthusiasm, all the Directors and other business \r\nleaders that expressed an opinion on the subject felt either that \r\nsales had picked up in the past weeks or shortly would do so.\nViews expressed regarding business confidence were somewhat more \r\nguarded. The chairman and president of a diversified electronic \r\nconcern did not look for a \"roaring upswing\" in business in the \r\nimmediate future. The president of an upstate bank saw businessmen \r\nas hopeful, but waiting to see more sign of an upturn. Some of the \r\nrespondents, however, expressed the opinion that the rise in \r\nconsumer spending and the concomitant increase in reorders should \r\nsoon be reflected in a strengthening of general business confidence.\nThe president of one of the largest construction companies in the \r\ncountry stated that he was very optimistic \"over the immediate \r\nfuture\". He did express concern, however, over the labor costs in \r\nthe construction industry. He looked for continued high wage \r\nincreases, with little or no improvement in productivity. He felt \r\nthat the President's voluntary program for wage and price restraint \r\nhad \"no real teeth\" and probably would have little effect. Indeed, \r\nthe respondents that expressed an opinion on this subject showed an \r\nalmost total lack of confidence in the effectiveness of this \r\nprogram. This attitude was perhaps best summed up in the remarks of \r\nthe vice president of Rochester's largest firm, a Director, who \r\nstated that he saw no chance for success in the program, and who \r\nindicated that his contacts with the organized construction industry \r\n\"show no influence from the program\".\nContinued concern over the danger of refueling inflationary \r\npressures was also reflected in the fact that even though business \r\nconfidence still seemed to be lacking real strength, all but one of \r\nthe respondents who commented on the topic felt that it would be \r\nunwise at this time to attempt to speed economic recovery through \r\nadditional fiscal stimulus through the tax cut speedups that have \r\nrecently been proposed. Most agreed, however, that if fiscal \r\nstimulus is desired, the implementation of these proposals would be \r\nthe best way to proceed.\nWith respect to bank lending policies, most bankers reported that \r\ntheir banks were seeking to make new loans, in some cases \r\naggressively. The Chairman of the Board of an upstate bank, however, \r\nnoted that the easing of credit terms seen in commercial centers had \r\nnot spread to country areas, and that his bank was not aggressively \r\nseeking new business loans.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-05-ch

"Beige Book Report: Chicago\nMay 5, 1971\nA number of important industries have experienced a turn for the \r\nbetter in the past several weeks. Retail trade apparently has \r\nimproved, and there is some concern for the adequacy of inventories \r\nif consumer demand accelerates. Prospects for residential \r\nconstruction appear even stronger than in earlier months, and there \r\nis a growing tendency to project the vigorous picture into 1972. \r\nCapital-expenditure prospects generally remain unfavorable, but \r\npetroleum firms have raised their sights on investment spending. \r\nMarkets for goods are more competitive, and price increases have \r\nbeen less frequent in recent weeks. Demand for labor remains very \r\nslow, and unemployment apparently is continuing to rise in this \r\nregion. Crop plantings are ahead of schedule, and larger acreage is \r\nbeing planted. Funds continue to pour into savings media, but demand \r\nfor credit, other than for residential construction, remains at \r\nreduced levels.\nTwo recent meetings of business economists in Chicago sounded a more \r\noptimistic tone than at any time in the past year. Among the \r\nmanufacturers reporting a firmer trend in orders or sales were \r\nproducers of building materials, components for industrial equipment \r\nother than \"heavy stuff\", light and heavy motor trucks, petroleum \r\nproduction equipment, nonautomotive consumer durables, farm \r\nequipment, and meat products. Reports on retail trade were more \r\nfavorable, but the improvements noted have been modest. Demand for \r\nairline services remains poor, and service is being curtailed. Steel \r\nshipments have been somewhat less than anticipated, and order \r\nbacklogs \"probably have peaked\". Demand for most machinery and \r\nequipment, and industrial and commercial buildings, has not \r\nimproved, and little hope exists that a significant upswing will \r\noccur in the next several months.\nIn the Chicago area, demand for virtually all types of workers experienced, inexperienced, newly trained, and those with \r\nestablished skills-is said to be the weakest in \"at least a decade\". \r\nFor some types of workers such as school teachers, and graduates of \r\ntechnical schools, the comparison must be pushed back further\u2014perhaps to the late 1930's. One large university reports that only \r\n25 percent of its seniors have firm offers of jobs, compared with 85 \r\npercent two years ago. The summer job prospect for students is said \r\nto be \"hopeless\". Construction unions are much more restrictive in \r\nissuing job permits to nonunion members, stating that many of their \r\nown members are out of work. Because of financial stringencies, many \r\nschool districts have reduced, or will reduce, their hirings. \r\nApplications for teaching jobs are extremely numerous. Enrollment in \r\nmany colleges and graduate schools is down this year, and further \r\nreductions are expected for the fall term. The effect of reduced \r\ncollege enrollment, of course, is twofold: fewer teachers are \r\nneeded, and more potential students are in the labor force. Even \r\nbanks have begun to limit hirings, and encourage early retirements. \r\nVoluntary quits are much less common than a year ago. As a result, \r\nfewer people are in job training programs. Available jobs are \r\nlargely in low-paid service positions and in commission sales work.\nResidential construction activity is picking up rapidly in most \r\nareas of the District. Nevertheless, ample supplies of workers are \r\navailable in virtually all building trades. In the Chicago area, \r\nwith a 31 percent rise in residential permits in the first quarter, \r\n60 percent were for apartments, compared with more than 70 percent a \r\nyear earlier. Available sites for new residential projects will \r\nbecome an increasing problem if the housing boom continues, mainly \r\nbecause of zoning and code restrictions. Recent municipal elections \r\nin Chicago suburban areas favored candidates opposed to multiple \r\nresidences, especially low-income housing. Mortgage money is \r\nincreasingly available at lower rates and easier terms. The \"equity \r\nkicker\" deals for financing apartment buildings, common in 1969 and \r\n1970, have about disappeared.\nWarm temperatures and relatively dry fields have permitted earlier \r\nthan normal soil preparation and corn plantings in the Midwest. As a \r\nresult, the increase in acreage planted may be even larger than the \r\n4 percent rise expected earlier. Larger acreage may encourage \r\npurchases of farm equipment. Demand for farm equipment had been very \r\nweak earlier in the year, but sales are reported to have improved \r\nrecently. Farmland values are reported to be rising moderately \r\nagain, after leveling off last year. Agricultural banks are \r\nexperiencing increased demand for farm loans. Because of rapid \r\ndeposit growth, bankers hope to expand loans this year because loan \r\nrates (about 7 1/2 percent) are much more favorable than rates \r\navailable on investment.\nBusiness loan demand at large city banks remains very slow, and may \r\nhave weakened further in the past month. Nevertheless, the recent \r\nrise in the prime rate was not considered a surprise, partly because \r\nearlier reductions were believed to have been excessive. Some city \r\nbanks are expanding mortgage and construction loan activities. \r\nSavings inflows continue very heavy at banks and savings and loan \r\nassociations. Rates paid on passbook savings and consumer-type \r\ncertificates have been reduced by a growing number of commercial \r\nbanks in the District, but the large Chicago loop banks have not \r\nreduced these rates and are not expected to do so in 1971. A \r\nsignificant volume of the inflow of funds to savings and time \r\naccounts represents money that had been invested in bills and \r\nsimilar instruments. Recent increases in rates paid on CD's by large \r\nbanks, and some extension of maturities, indicate that banks are \r\nrelying more heavily on this source of funds as a substitute for \r\nEuro-dollars.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-05-ph

"Beige Book Report: Philadelphia\nMay 5, 1971\nThe economic outlook is brighter than a month ago, but caution \r\nremains the watchword of businessmen, bankers, and directors in the \r\nThird District. Manufacturers are optimistic about sales and new \r\norders. On balance, they plan no further layoffs and hope to add to \r\ntheir payrolls during the second half of the years. However, they \r\nplan to hold the line on outlays for plant and equipment. Retailers \r\nreport a noticeable pickup in sales. Most indicate, though, that the \r\nconsumer remains bargain conscious. Bankers report a modest firming \r\nin loan demand, but say funds remain plentiful.\nThe modest expansion of Third District business activity is expected \r\nto continue, according to area manufacturers. A recent poll of area \r\nindustrialists shows that for April almost four times as many firms \r\nare registering increases in sales and new orders than are realizing \r\ndecreases. Regional executives are also optimistic about the outlook \r\nfor May.\nThe sustained increase in business activity apparently is having an \r\nexpansionary impact on hiring plans of area firms. Throughout the \r\npast twelve months, more area manufacturers were laying off workers \r\nthan were hiring them. The latest check of area manufacturers \r\nindicates, however, that for the first time in a year the number of \r\nfirms actually adding to their payrolls equals the number cutting \r\nback.\nDistrict manufacturers are optimistic also about the longer term \r\noutlook. More than 80 percent of them foresee the economy expanding \r\nhalf a year ahead. As a result of this anticipated expansion, over \r\n40 percent of the industrialists plan to add to their payrolls by \r\nthe end of the summer-triple the number hiring now. However, this \r\noptimism apparently is having little effect on spending plans for \r\nnew plant and equipment. While 20 percent plan to increase \r\ninvestment outlays during the next six months, 25 percent plan \r\ndecreases. The remainder expects no change.\nRetailers in the area are \"cautiously optimistic\" about the \r\nconsumer. One large department store reports that home furnishings \r\nhave begun to pick up after months of sluggishness, but the consumer \r\nremains price conscious. For example, bedroom suites in the $400 \r\ncategory are moving while those in the $500 to $600 range are not. \r\nSmall televisions and radios, rather than the larger and more \r\nexpensive models, are selling well. Clothing items with substantial \r\nmarkdowns sell easily, while higher price items move slowly. \r\nConsequently, one larger retailer from a \"quality store\" indicates \r\nsales promotion will be bargain oriented. He won't drop higher price \r\nlines, but he'll emphasize sale-price items.\nBusinessmen in general are still uneasy about stock building. \r\nRetailers especially seem reluctant to build inventories. One \r\ndirector, who is a manufacturer, says that this cautious attitude \r\nalso applies to wholesalers as well as manufacturers.\nMost of the banks report some modest firming in loan demand, but \r\nthey do not know how much of it relates to a pickup in economic \r\nactivity and how much is explained by the midmonth tax date. All \r\nbanks, however, still report overly plentiful supplies of funds. \r\nTheir major problem remains knowing what to do with them. There is a \r\ngrowing division of opinion among local banks about the trend of \r\nlong-term rates for the rest of the year. One group thinks that \r\nmodest progress on the inflation front and a pickup in the economy \r\nspells higher rates toward the end of the year. The other group \r\ncounts on the need for an adjustment from present rate spreads and a \r\nlessening of inflationary expectations to bring some further \r\nreductions in long-term rates. As far as the prime rate, one or two \r\nbankers thought that even though there was a modest pickup in loan\r\ndemand, the recent increase was premature.\nBankers still are concerned about the quality of credit and the \r\npossibility for substantial loan write-offs, but they are \r\nincreasingly hopeful that a reviving economy will bail some of these \r\nloans out.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-05-da

"Beige Book Report: Dallas\nMay 5, 1971\nEconomic activity in the Eleventh Federal Reserve District is \r\nexpected to improve moderately between now and the year-end. This \r\nwas the view expressed by a sample of university economists who \r\nperiodically write analyses of economic conditions in the region. \r\nMost anticipated that the pace of overall economic activity would \r\npick up somewhat but that no dramatic recovery was likely to take \r\nplace. They felt that consumer sentiment would improve, leading to \r\nincreased consumer expenditures-particularly for durable goods and \r\nhousing. A majority of the respondents also expected that the \r\nincreased purchases of housing would be stimulated by further \r\ndeclines in mortgage rates. However, most felt that bank lending \r\nrates and unemployment in the District would not decline much, if \r\nany, over the balance of the year. Moreover, nearly all anticipated \r\nthat inflation would persist through the year-end.\nA slim majority of the respondents felt that conditions in the \r\nDistrict had improved somewhat as compared with a year ago. Those \r\nwho described economic conditions as being weaker cited the local \r\ndrought as a major factor. However, nearly everyone anticipated that \r\nthe District would show some improvement by the end of the year, but \r\nvery few thought this improvement would be marked.\nAll respondents felt that the consumer would play an important role \r\nin the recovery. Consumer confidence and, consequently, consumer \r\nspending are expected to pick up. As a result, many anticipated that \r\nretail sales, particularly of durable goods, would increase \r\nsubstantially.\nMoreover, consumer demand for housing was viewed as being strong \r\nthrough the year-end. Consequently, most felt that construction \r\nactivity in the District would continue to rise and be a major \r\nsource of stimulus to the economic recovery. Some thought that a \r\nfurther downward movement in mortgage rates would bolster activity \r\nin the housing market, but these respondents anticipated that \r\nfurther declines in mortgage rates probably would be slight (about \r\n1/2 percentage point), bottoming out in the fall. A few felt this \r\nyear's low has already been reached.\nThe outlook for bank lending rates, unemployment, and prices was \r\nless optimistic. Most felt that bank lending rates would remain \r\nunchanged, or possibly increase somewhat, over the balance of the \r\nyear. Similarly, a majority expected that the unemployment rate was \r\nlikely to continue at the present level or rise slightly. And nearly \r\neveryone anticipated that inflation would remain a problem through \r\nthe year-end. A few thought there would be no further decline in the \r\nrate of inflation by the end of the year.\nAt present, indicators suggest little improvement in District \r\neconomic activity recently. For March, the Texas industrial \r\nproduction index and nonagricultural employment data for the \r\nEleventh District states showed virtually no change from February. \r\nThe component for durable goods in the production index continued at \r\na level 10 percent below that for the corresponding month a year \r\nago, due primarily to cutbacks in defense industries. Oil production \r\nin Texas is expected to fall by 1.4 percent in May, as the Texas \r\nRailroad Commission reduced oil allowables because of a seasonal \r\nslackening in demand and an improvement in international petroleum \r\navailability. But other District states kept their allowables at the \r\nhigh levels prevailing for the last several months. Drought \r\nconditions continue to have a major impact on the agricultural \r\neconomy of the western areas of the Eleventh District. The Texas \r\nrange condition was the lowest ever reported for April 1 since \r\nrecords were begun in 1923. As a result, farmers and ranchers have \r\nbegun culling their livestock herds. Weekly department store sales \r\nfor major metropolitan areas in the District continued to rise thus \r\nfar in April.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-05-mi

"Beige Book Report: Minneapolis\nMay 5, 1971\nThe unanimous feeling among directors of this Bank is that retail \r\nsales in this District have improved over the last month, and \r\nretailers in general are more optimistic in their expectations \r\nregarding future sales. Contrary to expectations, credit collection \r\nproblems among District bankers and retailers are not any worse than \r\nthey were a year ago, but wholesalers, especially in the \r\nconstruction industry, are noticing some instances of slower debt \r\nrepayments by contractors. Loan demand continues to be quite strong \r\nthroughout the District, and the general feeling is that it will \r\nintensify. Commercial banks are not competing aggressively for \r\nlonger term CD's.\nWithout exception, the directors of this Bank report that retail \r\nsales in their areas are above year-ago levels. A number of \r\nexplanations for this fact were given, including such things as the \r\nlate Easter this year, seasonable weather throughout the District, \r\nand even that last year was so bad that things had to get better. \r\nUnderlying all their comments, however, was an optimism not \r\nexpressed earlier this year. As one director said, \"Retailers are \r\nmore optimistic now than they have been for some time, and now they \r\nare not whistling in the dark.\"\nThere are, however, scattered indications that consumers are still \r\nhesitant about committing themselves to major purchases. One \r\ndirector stated that sales of used autos and machinery were very \r\nstrong while sales of new autos and machinery were very weak. In \r\naddition, two others said that new auto sales were weak in their \r\nareas.\nContrary to the expectation that the incidence of bad debts would \r\nrise following a prolonged period of contraction, debt repayment \r\nproblems in this District are no more prevalent than they were a \r\nyear ago. A number of directors even stated that collections and \r\ndebt repayments had accelerated in their areas, primarily because \r\nconsumers, in their uncertainty, are trying to clean up old bills \r\ninstead of buying new merchandise. In addition, consumers in the \r\ncopper-producing areas of the District, who are anticipating strikes \r\nthis summer, are trying to minimize their fixed obligations for this \r\nperiod.\nLoan demand, both throughout the District and in most kinds of \r\nloans, is relatively strong, and the general feeling is that it will \r\nstrengthen over the coming few months. One director, who is also the \r\npresident of a reserve city bank, stated that business loan demand \r\nis still very healthy and, contrary to his earlier feeling that \r\nloans at his bank will drop, he now expects them to continue rising. \r\nConsumer loan demand has also picked up along with the rise in \r\nretail sales, and mortgage loan demand is described as being brisk \r\nthroughout the District. According to our latest agricultural credit \r\nconditions survey, the demand for agricultural loans is rising more \r\nthan seasonally for several reasons, among which are the poor \r\nagricultural income situation, increased intended acreage this year, \r\nand a shift into higher cost crops such as corn this year.\nTime deposit growth at District member banks is continuing very \r\nstrong and has been running at a 20 percent seasonally adjusted \r\nannual rate since the turn of the year. The recent growth in total \r\ntime deposits has been evident throughout the District and reflects \r\nthe exceptionally heavy inflow of consumer-type time and savings \r\ndeposits. Large CD's, at least those at reserve city banks, have \r\nremained essentially flat since the latter part of 1970.\nMost District banks are no longer offering 5 3/4 percent on longer \r\nterm CD's, and those banks that will still accept them are not \r\nadvertising or actively pursuing them. For the most part, passbook \r\nsavings rates have not changed over the past month, although one \r\ndirector was aware of a bank that had dropped its passbook rate to 4 \r\npercent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-05-cl

"Beige Book Report: Cleveland\nMay 5, 1971\nRecent evidence indicates there is some expansion in economic \r\nactivity in the Fourth District, but the underlying trends remain \r\ndifficult to assess. The recent increase in the pace of business \r\nactivity in most areas of the District was largely the result of the \r\npost-strike auto rebound and the steel inventory buildup, although \r\nrecovery in residential construction continues to be strong. There \r\nare signs that the rebound in manufacturing that began last year, \r\nafter settlement of the auto strike, may be losing momentum. Demand \r\nfor labor remains sluggish, and there has been no improvement in \r\nunemployment in recent weeks. Our directors report signs of \r\nimprovement in certain phases of business and, in general, have \r\nbecome cautiously optimistic about the near-term business outlook.\nOur latest survey of District manufacturers indicated further \r\nimprovement in business conditions during March, with strength most \r\npronounced in new orders, shipments, and backlogs. (Indexes of \r\nmanufacturing output also showed continued gains in most \r\nmetropolitan areas in March.) Firms in our survey, however, reported \r\nno increase in employment in March, and they do not anticipate any \r\npickup in employment during April. Overall anticipations for April \r\nsuggest some tapering in the rate of gain in other key series such \r\nas new orders, shipments, and the workweek.\nNonfarm payroll employment in the District decline in February and \r\nMarch after recording increases for two months. Manufacturing \r\nemployment declined for the second consecutive month in March, while \r\nnon-manufacturing employment has been virtually unchanged for the \r\npast five months. The insured unemployment rate continued to move \r\nhorizontally during the first three weeks of April.\nEconomists in the steel industry informed us that steel shipments \r\nare roughly in line with orders at the present time. Orders will \r\nfall below shipments from May through July, as the backlog of orders \r\nis cleaned up, however. During the second quarter, steel production \r\nis expected to make about the same contribution to industrial \r\nproduction as it did in the first quarter, even though the rate of \r\nincrease is expected to taper after April. The industry economists \r\nalso reported that manufacturers should have sufficient steel \r\ninventories by the end of July to continue production for about two \r\nmonths in the event of a steel strike.\nOur directors are somewhat more optimistic about the business \r\noutlook than they were a few months ago. On balance, however, their \r\noptimism is tempered with caution, because they are not sure how \r\nmuch of the recent improvement in business is \"temporary\" and how \r\nmuch reflects a sustained improvement in overall economic \r\nconditions. Directors whose firms are suppliers to the automotive \r\nand residential construction industries report that business \r\nactivity remains at a high level. One director associated with a \r\nlarge paint, glass, and chemical manufacturing firm reported that \r\nsales of fiberglass materials used in tires and general glass \r\nproducts used in residential construction were especially strong in \r\nrecent weeks. Another director, who is associated with a large tire, \r\nchemical, and industrial products firm, noted that he considered the \r\nrecent acceleration of the firm's sales-especially chemical raw \r\nmaterials and rubber and plastic parts, and accessories-as a sign \r\nthat other industries are buying in anticipation of increased \r\nproduction and that he is \"a little more optimistic\". Another \r\ndirector from a sizable building and defense products firm noted \r\nthat orders for new capital equipment from utilities have been \r\nstronger than expected and that the firm now has a sizable backlog \r\nof orders in this area. Other capital goods markets (including \r\nmachine tools) are still soft, according to the comments of other \r\ndirectors.\nDirectors representing banks in the District mentioned \r\n that deposits, principally time deposits, continue to grow at a \r\n rapid pace. Loan demand, especially business loan demand, has \r\n remained sluggish. One banker-director from a large bank did note \r\n some pickup in loan demand in the last three weeks, but this seemed \r\n to be an exception to the general trend.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-05-at

"Beige Book Report: Atlanta\nMay 5, 1971\nWhile the outlook of businessmen and bankers is still mixed, \r\nconfidence appears to be increasing. A definite upswing in optimism \r\nis reported from various sections of the District, although from \r\nsome areas we still get reports that the future pace of recovery is \r\nin doubt or recovery is not widely based. Reports of employment \r\nincreases and plant announcements are becoming more numerous, \r\nwhereas weakness continues in such important regional industries as \r\ntextiles, aluminum, mobile homes, and phosphate production. A \r\nspecial survey of leading department stores throughout the District \r\nindicates that sales have been exceeding expectations and that \r\nrespondents are more optimistic than at any time in the past year \r\nand one-half. Because of recent wage settlements and possible \r\nstrikes by steel and aluminum workers and longshoremen, inflation \r\nfears persist.\nPlant announcements include a major urethane plant in Lake Charles; \r\nplants to manufacture water heaters, microwave ovens, gloves, and \r\nfire extinguishers in Alabama; a sewing plant in Alabama; a small \r\nappliance manufacturing plant in Mississippi; a household paper \r\nproducts plant in south Georgia; and a natural-gas-processing \r\nfacility in north Florida. In addition, a Gulf Coast shipyard has \r\nreceived an order for 246 Seabee barges. A power company executive \r\nreports renewed interest in industrial and other projects that were \r\npostponed earlier.\nThe trucking industry which transports poultry from Alabama and \r\nGeorgia and returns produce is reported to be expanding. For \r\nexample, one carrier with a fleet of thirty refrigerated diesels is \r\nbuying sixteen additional trucks and anticipates \"all the business \r\nhe can handle\". In Florida, port facilities are handling record \r\ntonnage, and frozen orange juice shipments are running 30 percent \r\nabove a year earlier. Also, some increase in operations is occurring \r\nat selected military installations; for instance, Alabama air bases \r\nare benefiting from the resumption of full operations at an air \r\nforce school and the transferring of a helicopter school from Texas \r\nto Alabama. The Mississippi test facility is adding 250 employees \r\nbecause of tests of the space shuttle craft engines; an increase in \r\nsales of nylon and dacron polyester products is responsible for a \r\n200-man employment rise at a Chattanooga chemical plant.\nHousing construction is reported strong in several areas of the \r\nDistrict. A large residential development-covering 1,000 acres and \r\nplanned for a community of 7,000-has been announced in Orlando. A \r\nhuge complex, including office buildings, a hotel, and retail shops, \r\nis being planned for downtown Atlanta. The project, which will not \r\nbe under construction for eighteen months, will eventually cost more \r\nthan $100 million. However, construction of a domed stadium in New \r\nOrleans may be delayed. Stadium bonds failed to attract any bidders, \r\nbecause some groups are opposing the stadium in the courts. The \r\nlegal .issues cannot be settled until the state legislature meets, \r\nand by that time market conditions may not permit the sale of these \r\nbonds within the 6 percent limitation.\nA Research Department telephone survey of department stores \r\nindicates that Easter sales were better than expected in New \r\nOrleans, Jacksonville, and Nashville. One leading store reported a \r\nyear-to-year 15 percent gain in sales in the January through mid-\r\nApril period. Sales have been weak in Birmingham, perhaps because of \r\nthe threat of a steel strike. The Atlanta sales picture was mixed, \r\nwith one respondent reporting sales stronger than expected but the \r\nother reporting sales about as expected. The survey detected a \r\nnoticeable increase in optimism among retailers, and most of the \r\nrespondents thought that the consumers had \"loosened up\" and begun \r\nto spend.\nThere are some notable exceptions to generally more prosperous \r\nconditions in the District. The mobile-home industry continues to be \r\nin a slump, although some pickup has been reported in recent weeks. \r\nSeveral mobile-home plants are reported to have closed in south \r\nGeorgia, and one Alabama producer has filed for bankruptcy. Yet, a \r\nsite has reportedly been purchased for a fourth mobile-home plant \r\nnear Ocala, Florida. One banker noted that he is reluctant to lend \r\nto mobile-home producers, because he believes the industry is \r\n\"shaky\", and he expects a consolidation of existing firms into three \r\nor four major producers.\nThe aluminum industry is also reported to be depressed, although \r\nstrike-hedge buying is expected to lift production soon. Employment \r\nat the Cape Kennedy Space Center has been holding steady, but \r\nanother sharp drop in employment is expected unless the center is to \r\nplay a part in the space shuttle program. Textile manufacturing in \r\nAlabama is reported weak, which is evidenced by the recent closing \r\nof a long-time sportswear producer. Four hundred have recently been \r\nlaid off by a maintenance firm that has a contract at an Alabama air \r\nbase. Three hundred and fifty employees have been laid off at a \r\nphosphate fertilizer plant in Florida. Because of the increase in \r\nunemployment, a prominent Gulf Coast employer reports that he is \r\nable to get and keep better employees.\nThere has been some increase in consumer loan delinquencies, mainly \r\nassociated with the start-up of bank credit cards.\nInflation remains worrisome. There is growing concern that the labor \r\nagreement in the can manufacturing industry may be the pattern for \r\nupcoming steel and aluminum industry negotiations. There is also the \r\npossibility of a longshoreman's strike in October. Prices of homes \r\nin Miami have risen 100 percent in the past five years, including a \r\n20 percent rise from the first quarter of 1970 to the first quarter \r\nof 1971. TVA has hinted that there may be another increase in \r\nelectric rates-on top of a 23 percent raise last October-when \r\nexisting coal contracts expire and have to be replaced with new ones \r\nat high price levels. Another natural-gas utility has requested a \r\nrate increase.\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/1971/1971-05-su

"Beige Book: National Summary\nMay 5, 1971\nThe overall impression that emerges from the Districts Red Book \r\nreports is that the economic outlook has taken distinct, albeit \r\nmoderate, turn for the better over the past month. Among the most \r\nencouraging developments is the evidence emanating from most parts \r\nof the country that the long awaited rise in consumer spending may \r\nfinally be getting underway, even though an underlying note of \r\ncaution characterizes most discussion of consumer attitudes. Several \r\nDistricts reports also point to strong residential construction \r\nactivity. On the other hand, while businessmen may be more \r\noptimistic than a month ago, business confidence has not as yet \r\ngrown to the point where firms are rushing to build up inventories, \r\nnor is there much, if any, evidence of an upward revision in planned \r\noutlays for plant and equipment. Moreover, apart from a few \r\nscattered signs of improvement, the unemployment picture remains \r\nrather bleak. Finally, continued concern over inflation was \r\nexpressed by a number of respondents in several of the Districts.\nTurning to consumer spending, all Districts report some improvement \r\nover the past month. In most instances, however, the increases in \r\nretail sales are characterized as \"slight\" or \"moderate\", and the \r\nconsumer is usually described as still cautious, and cost conscious. \r\nThe Boston Bank, for example, reports that retail sales in New \r\nEngland seem to have picked up somewhat, but that the consumer has \r\nby no means \"broken out\". Reports on retail trade in the Chicago \r\nDistrict were more favorable than earlier in the year, but the \r\nimprovement is characterized as modest. Similarly, the San Francisco \r\nBank reports that retail sales are rising at a moderate pace but \r\nthat in general retailers expect no major jump in consumer spending \r\nat this time. Some of the reports, however, are more optimistic. The \r\nPhiladelphia Bank states that retailers report a noticeable pickup \r\nin sales, even though consumers remain bargain conscious. The St. \r\nLouis Bank reports that retail sales picked up considerably in the \r\nweek before Easter and have remained at the higher level since then, \r\nwith clothing and appliances moving well and with a strong demand \r\nfor automobiles. All respondents in the Minneapolis and New York \r\nDistricts expressing an opinion on this topic felt that the retail \r\nsales picture had improved as compared to earlier in the year, and a \r\nspecial survey of leading department stores in the Atlanta District \r\nreveal that sales have been exceeding expectations.\nResidential construction also continues to be a bright spot in the \r\neconomic outlook-indeed perhaps a brighter one than earlier in the \r\nyear. The Richmond Bank thus reports that the majority of banking \r\nrespondents throughout the District feel a sustained surge in \r\nresidential construction, as well as a revival in nonresidential \r\nconstruction, is underway, while Chicago reports that prospects for \r\nresidential construction appear even stronger than in earlier \r\nmonths. Similarly optimistic assessments appear in several other \r\nDistrict reports.\nAlong with the pick up in retail sales and the sustained strength in \r\nthe construction industry, there are reports of an increase in \r\nmanufacturers sales and orders in a number of areas throughout the \r\ncountry. The Philadelphia Bank, for example, reports that a recent \r\npoll of area industrialists shows that for April almost four times \r\nas many firms registered increases in sales and new orders than \r\nshowing decreases, while the Cleveland Bank's latest survey of \r\nFourth District manufacturers points to further improvement in \r\nMarch, particularly in new orders, shipments, and backlogs. That \r\nBank's report, however, cautions that some tapering off in the rate \r\nof gain may have occurred in April.\nA more rapid expansion of industrial production, however, has been \r\ninhibited by the fact that business confidence, although stronger \r\nthan earlier in the year, has not as yet risen to the point where \r\nmanufacturers and retailers are willing to aggressively build up \r\ninventories, but prefer to maintain stocks at current levels. Thus, \r\nthe San Francisco Bank reports that, apart from stock piling of \r\nsteel, and some rise in building materials inventories, there is \r\nlittle evidence that businesses are rebuilding inventories. The \r\nRichmond Bank reports an actual decline on balance, in both \r\nmanufacturers and retailers inventories, while the St. Louis Bank \r\nreports that retail inventories have not been increased.\nOpinions are mixed among the Banks that discuss the unemployment \r\npicture in their District. The Kansas City Bank feels that the \r\nemployment situation is still soft and that only a modest \r\nimprovement is expected in the coming months. Similarly most \r\nrespondents in the Dallas Bank District thought that unemployment in \r\nthat area would not decline much, if at all, over the balance of the \r\nyear. Unemployment is apparently continuing to rise in the Chicago \r\narea, while the Cleveland Bank characterizes the demand for labor as \r\nsluggish. On the other hand, signs of some, if only tentative, \r\nimprovement can be found in the reports of the Philadelphia, \r\nRichmond and St. Louis Banks.\nMost Districts reported a firming of demand for bank loans, \r\nespecially consumer and mortgage loans, but in several instances \r\nbusiness loans as well. In general, loans continue to be readily \r\navailable.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-04-ch

"Beige Book Report: Chicago\nApril 6, 1971\nViews of informed persons in the seventh district continue to show a \r\nwide variation as to the strength of the uptrend likely in the \r\nremainder of 1971. Forecasts of GNP for 1971 range from $1,040 \r\nbillion to $1,060 billion. Unemployment continues to rise. Labor \r\ndisputes are frequent and difficult to negotiate. A flurry of price \r\nadvances were announced in March, perhaps reflecting expectations \r\nthat controls may be in prospect. The availability of funds \r\ncontinues to improve, but lenders are concerned with the quality of \r\ncredit applicants.\nAs a result of deterioration in Madison, Wisconsin, and Des Moines, \r\nIowa (both state capitals) there are, currently, no relatively \r\nstrong labor markets left in the seventh district. Unemployment in \r\nmost centers is the highest in seven or eight years, with rates \r\nranging from 4 to well over 10 percent. The mayor of Detroit \r\nbelieves his city's unemployment rate is 14 percent, with an \"inner \r\ncity\" rate of 25 percent. In the Chicago area (4.2 percent \r\nunemployed in February) employers report job applicants double last \r\nyear's level, while job openings are limited to hard-to-fill \r\npositions. Many job applicants are \"over-qualified\" in terms of \r\nprevious salaries. Plant closings, cost-cutting programs, returning \r\nveterans, and wives desiring to supplement family income continue to \r\nswell the number of job seekers. In no area is there evidence of a \r\nsignificant employment pickup except in home building and other \r\nseasonal activities.\nPrice advances announced in March-many to be effective in the \r\nfuture-were extremely numerous, in contrast to a lull in January and \r\nFebruary. A wide variety of products are involved, including \r\nchemicals, building materials, containers, and electrical \r\ncomponents. The increased frequency of price announcements was so \r\ndramatic as to suggest that some businesses are attempting to \r\nestablish a higher base for possible price controls.\nThe important district capital goods industries show little promise \r\nfor the near future. Demand for construction machinery is relatively \r\nfavorable. Demand for equipment related to pollution control is \r\nvigorous. But machine tool orders remain dismal, and demand for farm \r\nmachinery is very weak. One large producer of farm implements made \r\nno attempt to increase output to offset a recent three-week strike. \r\nThere are persistent rumors that two historically-important \r\nproducers of farm equipment intend to abandon the field.\nOpinions vary substantially as to the prospective strength of demand \r\nfor domestic new cars. It now appears that the influx of imports \r\nwill not be stemmed by the new domestic subcompacts. The Japanese \r\ncar producers are only beginning to tap potential U. S. markets. \r\nMeanwhile, quality questions, and availability of foreign-made \r\ncomponents, may limit sales of domestic subcompacts.\nThe volume of real estate transactions has increased sharply as \r\ncredit availability has improved. Prices of used houses have \r\nincreased recently after weakening in 1970. Project builders again \r\nare pushing developments that had shut down last year. Some new \r\nlarge-scale recreational area projects are being activated. New \r\nplans for manufacturing and commercial construction, however, are at \r\na low ebb.\nCommercial banks and S&Ls are being flooded with funds\u2014\"More than we \r\ncan use.\" Business loan demand is said to have weakened again in \r\nMarch.\nRepayments of policy loans at life insurance companies have \r\nincreased sharply. Apparently, many of these were business loans, or \r\nloans used to purchase short-term securities when market rates were \r\nabove the policy loan contract rate.\nThere is general expectation that rates on long-term corporates will \r\ntumble in the next few months. Two banks in the Chicago suburbs cut \r\nrates paid on savings recently, but no action has been taken by the \r\nlarge banks.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-04-ph

"Beige Book Report: Philadelphia\nApril 6, 1971\nBankers, businessmen, and Directors in the third district continue \r\nto see signs of a modest recovery. However, there is a widespread \r\nfeeling among them that the recovery will not gain momentum unless a \r\nmajor improvement in consumer and business sentiment occurs and few \r\npeople that we talked with see such a change on the near-term \r\nhorizon, barring a more stimulative economic policy.\nThe modest business expansion which began around the first of the \r\nyear is continuing in the third district. A recent poll shows that \r\nfor March nearly five times as many district manufacturers are \r\nexperiencing increases in new orders and shipments than are \r\nrealizing decreases. A similar pattern is expected for April. In the \r\nsame vein, a utility executive in New Jersey reports that there has \r\nbeen a pick up in the industrial consumption of electricity in \r\nrecent weeks.\nDespite this step-up in activity, area manufacturers remain \r\ncautious. They do not plan to hire additional employees until the \r\nfirmness of the recovery is more established. They intend to keep a \r\ntight rein on inventories, and they anticipate no increase in \r\noutlays for plant and equipment during the next six months.\nArea retailers report the course of consumer spending is uncertain \r\nat the moment. Easter occurred in March last year and will fall in \r\nApril this year. Consequently, say local merchants, year-to-year \r\ncomparisons will be distorted for both months. It will make more \r\nsense to combine sales in both months and then compare with the \r\nperformance of last year, they say.\nOne large retailer, however, indicated that consumers are still very \r\nprice conscious. He reported that a recent warehouse sale with \r\nsubstantial markdowns in price was a big success.\nIt is also his \r\nopinion that the mood of the consumer is still to forego buying \r\nwherever possible.\nConsumer caution is apparent in reports from area bankers. The flow \r\nof funds into savings accounts continues at high rates. A couple of \r\nbanks which have cut passbook rates report that the reduction has \r\nhad no impact on their savings flows. All of the banks contacted \r\nindicate that they are in the midst of a profit squeeze. Further, \r\nthey see no relief coming from an increase in loan demand at least \r\nfor the near term.\nProjections of long-term interest rates vary from bank to bank; \r\nhowever, nobody expects substantial declines in long-term rates \r\nduring the coming months. For one thing, they expect funding to go \r\non for a while longer; for another, they believe that lenders and \r\nborrowers will continue to build an inflation factor into their \r\ncalculations.\nAlthough Directors and others are willing to talk about current \r\nbusiness conditions, they are stressing more and more the importance \r\nof psychological conditions as the key to the economic outlook. \r\nThere is general agreement that the recovery will not pick up steam \r\nunless consumer sentiment is uplifted. One Director says, \"It's very \r\nhard to convince the consumer that the economy is still growing when \r\nhe looks around and sees people unemployed, plants still laying off \r\nworkers, industrial production dropping off, and retail sales \r\nmodest\". Another Director pointed out that \"rising taxes, rising \r\nBlue Cross rates, rising utility costs, etc. are enough to make him \r\ncut back on his spending even without the fear of unemployment\". \r\nStill another Director indicated that the Administration's extremely \r\noptimistic forecast for 1971, now widely discredited, has actually \r\nhad a negative impact on confidence. \"By being so wide of what can \r\nreasonably be expected, people believe that the Administration is \r\ntrying to talk them into a recovery that really isn't going to \r\nhappen\", he added.\nOn how to improve confidence, many businessmen and some Directors \r\nare not optimistic about the role of monetary policy. \"Pushing on a \r\nstring\" and \"you can lead a horse to water, but you can't make him \r\ndrink\" are commonly heard analogies about the role of monetary \r\npolicy in restoring confidence. An increasing number of people that \r\nwe talked with believe that a reduction in personal taxes along with \r\na tougher stand against wage and price increases may be necessary if \r\nconfidence is to be restored and the recovery sustained.\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/1971/1971-04-kc

"Beige Book Report: Kansas City\nApril 6, 1971\nA survey of Head Office and Branch Directors, and other area \r\nbusinessmen, suggests that economic conditions in the Tenth Federal \r\nReserve District are improving somewhat. Yet there is recognition \r\nthat any further unfavorable movements in the Nation's economy might \r\ncause a resumption in the economic problems of the District states. \r\nBusiness people in some District states feel that the economic slump \r\nreported for the rest of the Nation has not been as severe within \r\ntheir own areas. At the same time, one Director, who reports his \r\nstate less hard hit by the recent economic slump than the Nation as \r\na whole, feels that a continual bombardment of the local area with a \r\nnational psychology of recession has made workers and consumers \r\nwithin the state more worried and cautious than they otherwise would \r\nbe, and than may be warranted by the local economic situation.\nThe northern states of the District have continued to feel adverse \r\nweather conditions which have been reflected in slower improvement \r\nin business conditions than would normally be true for this season \r\nof the year. In general, the employment outlook seems to be one of \r\nsome moderate growth in employment but not fast enough to wholly \r\noffset expected labor force increases. Thus near-term improvements \r\nin the overall unemployment rate within the District are expected to \r\nbe modest, if apparent at all. District firms are trying to do a \r\nbetter job with fewer people on their payrolls and, at this point, \r\nseem to be using attrition rather than layoffs to keep the size of \r\ntheir work forces within bounds.\nConstruction activity continues to be favorable but remains variable \r\nwithin the District. Residential construction is strong in Colorado, \r\nfor example, but is reported by some Directors to be currently less \r\nstrong in metropolitan areas of Oklahoma. A pickup in home-building \r\nin the Kansas City metropolitan area seems to be definitely under \r\nway since settlement of last year's construction strike, with \r\nbuilders starting to build speculatively again. A spokesman for the \r\nlocal homebuilders association suggests that the national figure of \r\ntwo million housing starts for the year seems perfectly possible, \r\neven likely, if the Kansas City area's present experience and \r\nexpected performance is any indication. The housing mix in the \r\nKansas City area seems to be distributed between single-and \r\nmultiple-family dwellings about as it has been in the recent past. \r\nThere also seems to be evidence of a tendency toward lower priced, \r\nsmaller, new single-family houses with fewer frills, among new \r\nconstruction in the Kansas City area.\nTwo Directors, themselves engaged in the construction industry, \r\ncommented about labor market and labor relations conditions in that \r\nindustry within the District. One Director reports that, with this \r\nyear's construction activity in his area down from last year's \r\nbetter-than-average level, union employment in the area is down to \r\nits lowest level in years. This is already apparently making union \r\nlabor somewhat less militant than before, in the sense that they are \r\nshowing a willingness to work with nonunion workers on a job and do \r\nnot press for union labor only. This should, in his opinion, keep \r\ncosts of construction from rising as much as they might otherwise. \r\nHe also feels that the President's action concerning the Davis-Bacon \r\nAct will have a restraining influence on construction cost \r\nincreases, especially for construction jobs in smaller towns \r\nsurrounding a major urban area. The second Director referred to \r\nabove, who is from another state in the District, also sees some \r\nsigns of a tempering of union wage demands in the construction \r\nindustry. Some crafts in Oklahoma City, according to this Director, \r\nhave recently settled for nominal increases compared with those of \r\nthe recent past. These types of settlements have resulted because of \r\nan apparent feeling by the unions that they have been pricing their \r\nworkers out of jobs. He feels that other crafts will not even aim so \r\nhigh as the settlement that has been recently completed. He sees no \r\ndirect effects in this situation of the Davis-Bacon action but \r\nsuggests that it is more likely to result from such things as fear \r\nof direct controls, the possible loss of jobs, and other factors.\nBank loan demand, which was reported as weak in February, appears to \r\nhave firmed up recently according to District bankers. With building \r\nactivity picking up in the District, construction loans are showing \r\nconsiderable strength. Consumer installment loans also are reported \r\nto be showing some improvement. A mixed picture, however, is \r\npresented by business loans. Loan demand by some of the large \r\nnational accounts continues to be weak. On the other hand, loan \r\ndemand by locally based firms is said to be steady to moderately \r\nstrong. Supporting evidence that overall loan demand in the District \r\nmay be picking up somewhat is that a number of bankers report a \r\nmarked increase in overline loan demands coming from their country \r\ncorrespondents.\nBanks continue to experience strong deposit inflows in demand and \r\ntime accounts considering seasonal factors. Rates paid by District \r\nbanks on large CD's have declined in line with the New York market, \r\nwhile rates paid on consumer CD's and passbook savings have \r\ngenerally remained unchanged during the past month. In many \r\ninstances, however, banks indicate that they are considering the \r\npossibility of lowering their time and savings rates. One bank \r\nreported that on its consumer CD's it was now computing interest on \r\na quarterly basis instead of on a daily basis. Nonetheless, the \r\nprevailing attitude toward further reductions in time and savings \r\nrates is one of caution. Underlying this cautious attitude is the \r\nreluctance of bankers to discourage deposit inflows because they \r\ngenerally expect bank loan demand to improve gradually over the \r\ncoming months.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-04-cl

"Beige Book Report: Cleveland\nApril 6, 1971\nIt is difficult to assess the underlying economic trends in the \r\nfourth district at the present time. Current statistics are \r\ndistorted by the effects of strike-and price-hedge buying in the \r\nsteel industry and the rebound in motor vehicles and supplying \r\nindustries. After allowing for the steel and auto situations, there \r\nis little evidence pointing to a strong recovery in economic \r\nactivity in the area, especially in the capital goods industries. \r\nThe reports of our Directors reflect the sluggish pace of domestic \r\neconomic conditions, while business activities of several Directors' \r\nfirms in foreign markets continue to expand.\nThe district index of manufacturing output (based on electric power \r\nconsumption) reached what may have been a \"cyclical low point\" in \r\nNovember 1970 and turned up in December; the index has continued to \r\nrise in January and February. Practically all of the February gain \r\nstemmed from two industries: primary metals and transportation \r\nequipment. The results of our monthly survey of manufacturers follow \r\na parallel path: the recent \"low point\" occurred in November; an \r\nupturn took place in December and continued through February. The \r\nmagnitude of the rebound in activity from the November low point (as \r\nmeasured by the behavior of the diffusion indexes) reflects the \r\nsteel and motor vehicle situations to a considerable extent. The \r\nmost recent survey, conducted during the first two weeks of March, \r\nrevealed a persistence of cautious hiring policies on the part of \r\nmost firms, despite expectations that business would continue to \r\nimprove in March.\nLabor market statistics for district areas are at some variance with \r\nthe apparent improvement in manufacturing during February that was \r\nsuggested by our index of manufacturing and our survey of \r\nmanufacturers. Manufacturing employment in the district declined \r\nalmost as much in February as it increased in January. Furthermore, \r\nwhile the insured unemployment rate leveled off in February, \r\nfollowing a sharp decline from November to January, there are \r\nindications that unemployment in the district will show a slight \r\nincrease in March.\nSteel industry economists in the district reported that steel \r\nconsumption appears to be rising more slowly than was generally \r\nexpected. Machinery accounts are not as active as consumer goods \r\nindustries in terms of placing new orders for steel. One major steel \r\nfirm reported that orders peaked in January; another major firm \r\nindicated that the peak was reached in February. The industry \r\neconomists also indicated that recently announced price increases \r\n(effective May 1) on a variety of steel products are an important \r\nfactor in the current increase in steel shipments.\r\nOur Directors' comments about business in their particular \r\nindustries reflected the generally lackluster performance of most \r\nsectors of the economy, especially the capital goods sector. One \r\nDirector, however, noted that public utilities were stepping-up\r\norders for new equipment. Two Directors associated with large office \r\nequipment and computer manufacturers reported limited signs of a \r\npickup in certain lines during February. Another Director, \r\nrepresenting a medium-sized diversified glass products manufacturer, \r\nreported that consumer markets are still sluggish; the strong upturn \r\nin residential construction, however, has resulted in a substantial \r\nincrease in demand for glass products used in new homes. Demand in \r\nforeign markets remains brisk, according to several Directors, and, \r\nin some instances, is partly offsetting weakness in domestic \r\nmarkets.\nDirectors from both large and small banks commented on continued, \r\nsubstantial inflows of deposits, suggesting that consumer savings \r\nremains high. The banker-directors reported that banks are \r\nexperiencing a squeeze on profits and, as a result, are cutting \r\nrates on savings deposits. (Savings and loans in the district are \r\nalso posting lower rates on savings accounts.)\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-04-ri

"Beige Book Report: Richmond\nApril 6, 1971\nSurveys of businessmen and bankers in the fifth district indicate \r\ngeneral agreement on the following points: (1) further improvement \r\nin manufacturers' new orders and shipments with a decline in \r\nbacklogs of orders; (2) continued improvement in retail sales and \r\nautomobile sales; (3) softness in manufacturing employment, but some \r\nimprovement in retail trade and service employment; (4) some backup \r\nof prices in manufacturing and continued upward pressure on retail \r\nand service prices; (5) strong improvement in residential \r\nconstruction activity; (6) further improvement in the demand for \r\nmortgage loans and consumer loans and slight improvement in business \r\nloan demand.\nImprovement noted last month in district manufacturing activity has \r\ncontinued through March according to most manufacturing survey \r\nrespondents. Respondents in nonferrous metals, steel, electrical \r\nequipment, containers, chemicals, and hosiery indicate an increased \r\nvolume of new orders and increased shipments. Backlogs of orders \r\nhave declined during March.\nRetail sales of goods and services continue to improve according to \r\ndistrict bankers and retailers. Automobile sales in March continued \r\nthe rapid advance begun in January. Both retail inventories and \r\nmanufacturers' inventories are reported to have increased slightly \r\nfurther during the past four weeks.\nEmployment in manufacturing industries remains soft in the district. \r\nReporters in textiles, furniture, chemicals, and electrical \r\nequipment continue to report employment down on balance. Hours \r\nworked per week also continue to be off according to manufacturers. \r\nReports of further declines, however, are less numerous than they \r\nwere last fall, and the impression expressed by some respondents \r\nthat the employment situation is stabilizing seems reasonable. \r\nDistrict retailers and bankers report some improvement in the \r\nemployment picture.\nThe price situation among district manufacturers is reported to have \r\nchanged somewhat during the recent four-week period. Earlier surveys \r\nthis year showed price declines outnumbering price advances among \r\nmanufacturing respondents. A slight reversal occurred during March, \r\nhowever, as important producers in chemicals, building materials, \r\nand steel marked prices up. Retailers and respondents in the service \r\nindustries report prices continuing to rise on balance. According to \r\ndistrict manufacturers, wages remain relatively stable during March.\nResidential construction is reportedly continuing to improve sharply \r\nover the district at large. Without question, this is the most \r\nebullient sector of the fifth district economy at present. \r\nNonresidential construction is reported not to have changed \r\nsignificantly during the past four weeks. Some respondents indicate, \r\nhowever, that they expect a considerable increase in road and other \r\nnon-building government construction in their respective areas in \r\norder to alleviate unemployment.\nConsumer loan demand and mortgage loan demand at district banks are \r\nreported to have improved further during March. Demand for business \r\nloans has improved somewhat from the reduced levels of the past four \r\nmonths, but is still characterized as down on balance by district \r\nbankers.\nThe general outlook of survey respondents continues to improve. \r\nSettlements were reached in March in several significant strikes \r\nwhich had adversely affected the district economy since last fall. \r\nThese strikes were in coal mining, textile products, and metal \r\nproducts, all in West Virginia.\nComments received from respondents indicate growing optimism \r\nconcerning construction and the employment outlook. The latest \r\nsurvey shows a continuation of the cautious attitude of \r\nmanufacturers concerning capital spending plans. A few respondents \r\neven indicate that further downward adjustments of plans have been \r\nmade recently.\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/1971/1971-04-ny

"Beige Book Report: New York\nApril 6, 1971\nThe opinions expressed by the Directors of this Bank and the Buffalo \r\nbranch and other business leaders in general continued to point to \r\nan uncertain economic outlook. On balance, the assessment was: a \r\nstill cautious consumer attitude; a somewhat less optimistic \r\nresidential construction picture; little or no improvement in the \r\nunemployment situation; and relatively uninspiring prospects for \r\n1971 corporate profits. Sentiments were mixed with respect to the \r\nlikely volume of further corporate borrowing in the bond market.\nIn view of most of the Directors and of the retailers that were \r\ncontacted, the long awaited rebound in consumer spending has not as \r\nyet materialized. Indeed, it was generally believed that no real \r\npickup in consumer spending could be expected as long as consumer \r\nconfidence continued to be adversely affected by the unemployment \r\nsituation. Several of the respondents, however, felt that given the \r\ncurrent high rates of individual savings, a change in consumer mood \r\ncould well trigger a sharp increase in such outlays.\nWith respect to residential housing construction the picture painted \r\nby the respondents was somewhat less rosy than it had been in \r\nearlier months. To be sure, the consensus was that there still \r\nremained a shortage of housing for lower and middle income families, \r\nand that mortgage money had become more readily available at lower \r\nrates.\nOn the other hand, it was felt that to a large extent the demand for \r\nhousing was being met by multiple housing units rather than by \r\nsingle family units, with several of the Directors expressing the \r\nopinion that the high cost of construction and the increase in \r\nproperty taxes acted as stronger deterrents to single home purchases \r\nthan the current level of mortgage rates.\nSimilarly, the Directors in general were less than sanguine \r\nregarding the employment situation. Two of the Directors felt the \r\nemployment picture had strengthened somewhat in the Buffalo area as \r\na result of the resumption of activity at plants providing parts for \r\nthe automobile industry and increased employment in the steel \r\nindustry due to strike hedging inventory accumulation. However, the \r\nChairman of the Board of a large New York City bank reported that \r\nlayoffs were continuing in the airlines, railroad and other \r\nindustries, while the vice president of the largest firm in \r\nRochester saw no sign of strengthening of the employment picture in \r\nhis industry. Moreover, the President of a large department store in \r\nthat city reported that more workers were being laid off \"without \r\npublicity,\" and that unemployment was rising. Most of the other \r\nrespondents expressing an opinion on the subject either saw no \r\nimprovement or a further weakening in the unemployment picture.\nSentiments regarding the outlook for corporate profits in 1971 also \r\nwere not particularly optimistic. The Buffalo branch Directors all \r\nfelt that 1971 profits would be at or above 1970 levels, but well \r\nbelow those of 1969. The Chairman of the large New York City bank \r\nregarded the outlook for corporate profits in 1971 as \"not too \r\nbright,\" another Director expected 1971 profits to be \"flat,\" while \r\nsome Directors felt that profits would be lower than in 1970.\nOpinions were mixed regarding the prospects for a let-up in the \r\nvolume of corporate borrowing in the bond market in the near future. \r\nThe Directors of the Buffalo branch unanimously felt that \r\ncorporations would continue to tap that market\u2014as well as the \r\ncommercial paper market\u2014to meet their credit needs, with the paying \r\noff of commercial loans continuing at a substantial rate. A Director \r\nof the New York Bank, on the other hand, noted that while SEC \r\nregistrations for corporation bond market borrowings were still \r\nheavy in volume, they were lower than a few months ago, and he \r\nbelieved such borrowings would level out. Similarly, the Chairman of \r\nthe large New York City bank felt that corporate bond market \r\nborrowing would not continue at its current pace for very long.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-04-at

"Beige Book Report: Atlanta\nApril 6, 1971\nLeading businessmen and bankers around the district seem to have \r\nbecome somewhat more optimistic about the economic situation-present \r\nas well as future. A growing number feel that the business picture \r\nhas brightened somewhat and note a pickup in announcements of \r\ncapital spending plans. Scattered declines in consumer CD and \r\npassbook rates are expected to spread. The outlook consensus of \r\nseveral economists in our region corresponds more closely to those \r\nof private economists than that of the Council of Economic Advisers.\nBusinessmen have specifically described business as \"good\" in such \r\ncities as Baton Rouge, Jackson, Orlando, and Knoxville. Recently \r\nstarted and prospective construction projects are a common cause for \r\noptimism. Included in such projects are a convention center, \r\nshopping mall, and bank building in Knoxville and a shopping center \r\nand retail distribution facility elsewhere in Tennessee; a school, \r\napartment complex, and bank building in Birmingham; and a $100-\r\nmillion power plant in Mississippi. In the Jacksonville area, it has \r\nbeen reported that \"A tremendous number of large real estate \r\ndevelopments have recently been announced or are in the immediate \r\nplanning stages.\" These include two large office buildings, a \r\nresidential complex for retired persons, and a high-rise apartment. \r\nIt was also predicted that ten new plants would be under \r\nconstruction in the Jacksonville area by the end of the year.\nA rash \r\nof plant announcements are also expected in central and east \r\nTennessee. In the New Orleans area, a $100-million expansion of a \r\nmedical complex is starting and construction is expected to begin \r\nshortly on a domed stadium. Construction of a basketball coliseum \r\nhas started in Atlanta, and a large air freight center has been \r\nannounced. Also, two modular home plants have been announced, one on \r\nthe Gulf Coast and one in South Georgia. Resumption of full \r\nproduction has occurred at a textile plant in Tennessee and at tire \r\nplants in Tennessee and Alabama.\nOn the other hand, businessmen are reported to be very profit \r\nconscious and are making every effort to reduce work forces. Further \r\nlayoffs have recently been announced in the aerospace industry. \r\nIndustrial growth has reportedly ceased along the Mississippi River. \r\nThree textile mills have closed. A continuing inability to obtain \r\nlong-run contracts for natural gas is reportedly hindering plant \r\nlocation in the New Orleans area.\nRecent price increases have occurred in hospital and auto insurance \r\nand water rates, but the incidence of price increases seems to have \r\nlessened.\nThe largest savings and loan association in Florida and a savings \r\nand loan in Nashville have reduced their peak rates on certificates. \r\nThree banks, one in Miami and two in Nashville, have reduced their \r\npassbook rates from 4 1/2 percent to 4 percent. Rate reductions are \r\nexpected to become general in the Nashville area.\nA group of academic and professional economists in the Atlanta \r\nregion expects about a $1,045-billion GNP this year, a 5.8 percent \r\naverage unemployment rate, and more than a 4-percent increase in \r\nprices. All of the economists thought that at least a 9-percent \r\nexpansion of the money supply would be required to achieve a $1,065-billion GNP, but none advocated that large an increase in the money \r\nsupply because they considered it inflationary.\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/1971/1971-04-sl

"Beige Book Report: St Louis\nApril 6, 1971\nA moderate uptrend of business in the eighth Federal Reserve \r\ndistrict continues, according to a number of leading businessmen \r\ninterviewed. Most manufacturers see signs of business gains as the \r\nyear progresses. Retail sales continue to be sluggish, although on a \r\nseasonally adjusted basis they are somewhat above levels of last \r\nautumn. Home building continues to expand. Unemployment remains \r\nrelatively high, and few firms report net hirings. Layoffs, however, \r\nseem to be at an end. Capital spending plans have been scaled down \r\nfrom levels planned a year ago.\nRetail sales are somewhat above levels of the autumn months on a \r\nseasonally adjusted basis but have failed to maintain the sharp \r\nincreases achieved just prior to Christmas. The false Christmas \r\nsignal and the failure of sales to recover as quickly as they did \r\nfollowing some previous slowdowns have been disappointing to some \r\nretail firms. Nevertheless, retail inventories have been maintained \r\nat moderate levels.\nResidential housing construction is continuing to improve over the \r\nvery low levels of last summer. Reporters throughout the district \r\nindicate sizable gains in low-cost home construction.\nCommercial and industrial construction is still described as \"soft.\" \r\nThe few new building projects reported are for nonprofit \r\norganizations, such as hospitals, schools, and homes for the aged.\nManufacturing firms are generally becoming more optimistic. Orders \r\nare reported to be rising, and retrenchment plans for employment and \r\ncapital investment have been largely completed. In the clothing \r\nindustry production of knit goods is booming, but limited by a \r\nshortage of knitting machines. Demand for synthetic fibers is \r\nincreasing but remains weak judging by long-run growth trends. Some \r\nother lines of manufacturing, such as brewing, feed, and dairy \r\nprocessing, have not experienced a decline in activity during the \r\ncurrent slowdown.\nThe labor picture is little changed from a month ago. Unemployment \r\nremains relatively high, and no early improvement is expected. \r\nApparently, most employment increases in recent weeks have been \r\noffset by additions to the labor force. Few firms are actively \r\nrecruiting help. Some firms which have in prior years regularly \r\nrecruited at college campuses report that no recruiting is being \r\ndone this year.\nCapital investment may have reached a trough. The combination of \r\nhigh interest rates and sharply declining profits last year quickly \r\ndampened investment spending plans of a number of larger \r\nmanufacturing companies in the district. The rising optimism and \r\ndeclining interest rates of recent weeks, however, are reawakening \r\nsome plans for additional investment. One large manufacturing firm \r\nreported that its investment will bottom out in the first half of \r\nthis year and moderately expand in the second half, largely due to \r\nsome expectations of profit improvement.\nLoan demand in the district continues to be weak, and liquidity of \r\nbanks is very high. Some firms report that lending rates are even \r\nlower than announced levels. To date, no district banks have \r\nannounced a decline in rates paid on savings or small time deposits, \r\nbut numerous complaints of a profit squeeze have been heard.\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/1971/1971-04-su

"Beige Book: National Summary\nApril 6, 1971\nWhile this month's district Redbook reports are conflicting on \r\nseveral points, their general tenor must be judged pessimistic. \r\nNearly half the districts reported increasing signs of recovery, but \r\nan equal number characterized business and employment conditions as \r\nunchanged or deteriorating from January-February levels. When \r\nweighted for firmness of conviction, the April responses emerge as \r\nclearly bearish.\nOn the employment front, the Cleveland, New York and Chicago \r\ndistricts reported that unemployment seems to be rising, while most \r\nother districts reported no change or nearly imperceptible \r\nimprovement. Several districts cited continued layoffs in a wide \r\nvariety of occupations, and others described continuing efforts at \r\npayroll trimming via reduced recruiting activity and inaction in \r\nreplacing normal losses from attrition. Labor militancy in current \r\nand forthcoming contract negotiations was reported to vary widely \r\namong districts.\nConsumer caution remains readily apparent in all but the Richmond \r\ndistrict. Even allowing for the later Easter this year, March retail \r\nsales have been disappointing. Consumer cost consciousness remains \r\nconspicuous, and no convincing evidence of a recovery in auto demand \r\ncan be found. Individual district respondents continue to stress \r\nawareness of unemployment and layoffs as the major explanatory \r\nfactor in consumer behavior, suggesting that there is no compelling \r\nreason why a consumer resurgence should be imminent.\nIn the manufacturing sector, several districts reported that 1971 \r\nshipments levels in major regional industries are showing some \r\npickup over midwinter lows. In many cases, however, increased \r\nshipments are proceeding at the expense of diminished backlogs. \r\nChicago and Boston districts both reported severely depressed \r\nconditions in the machine tool industry, with no current prospects \r\nfor improvement over 1971. No common trend in industrial pricing is \r\nidentifiable as district Directors report news of increased price \r\nshading as well as expected price rises. Five districts report \r\ncontinuing austerity in industrial capital spending plans, although \r\nthe Atlanta district discerns the early signs of a recovery in this \r\narea.\nMost districts report a substantial pickup in residential mortgage \r\ndemand, but only Richmond, San Francisco and St. Louis were able to \r\nattribute this to definite strength in residential construction. \r\nIncreased mortgage demand elsewhere seems heavily based on a flurry \r\nof sales of existing structures. New York district respondents are \r\nless optimistic about single family residential construction \r\nactivity now than a month ago.\nLoan demand at commercial banks was reported higher in three \r\ndistricts, and unchanged to lower in five others. Deposit inflows \r\nare uniformly characterized as heavy relative to loan demand. Six \r\ndistricts now report cuts in passbook savings rates at major \r\ncommercial banks, and bankers in other districts are considering \r\ncuts while watching market developments. Banking Directors in three \r\ndistricts took note of a developing profit squeeze in the commercial \r\nbanking sector as a result of interest rate developments. Countering \r\nthis nationwide trend are banks in the Kansas City and St. Louis \r\ndistricts, which have not dropped rates to date.\nBanking respondents in the Philadelphia district expect no \r\nsubstantial declines in long rates over the coming months, citing \r\ncontinuing corporate funding needs and the addition \r\nof an \r\n\"inflationary factor\" to projections of borrowing requirements. A \r\nDirector of the New York bank, on the other hand, noted that SEC \r\nregistrations for corporate bond issues\u2014while still high\u2014are \r\ntapering off and that a lighter calendar can be expected to develop. \r\nAcademic respondents in the Boston district concurred with the \r\nlatter view, projecting a fall in long-term corporate rates to below\n7 percent by summer.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-04-da

"Beige Book Report: Dallas\nApril 6, 1971\nEconomic activity in small rural communities in the eleventh \r\ndistrict is not likely to improve much this year\u2014in the opinion of \r\nbankers at banks with less than $10 million in deposits. Loan demand \r\ngenerally has remained weak in the areas served by these banks even \r\nthough the banks have ample lendable funds and have reduced their \r\nlending rates in recent weeks. The drought conditions in the \r\nSouthwest have contributed to the continued sluggish economic \r\nactivity in such rural areas. But economic conditions in the entire \r\ndistrict also have shown no real improvement recently.\nMost of the bankers surveyed expected economic conditions in their \r\nareas this year to remain unchanged from the subdued pace of last \r\nyear. Of those that did expect some change, the number anticipating \r\na deterioration was slightly larger than the number expecting an \r\nimprovement. Drought conditions were cited as a major depressant by \r\nthose anticipating a further decline in economic activity.\nThe slow economic pace in these areas is reflected in the overall \r\nweakness in loan demands at these banks. Most of the respondents \r\nreported that, generally, loan demands have remained essentially \r\nunchanged since the end of the year. There has been some .pickup in \r\nthe demand for mortgage credit, and to a lesser extent for consumer \r\ncredit. However, these increases have been offset, at least in part, \r\nby a weakening in the demand for business loans.\nThe relatively small demand for loans occurred in spite of a \r\nsubstantial supply of lendable funds at these banks, a greater \r\nwillingness to make loans, and recent reductions in lending rates. \r\nMost respondents indicated that inflows of funds were far in excess \r\nof that necessary to meet prevailing loan demand. In every reported \r\nloan category (business, consumer, mortgage, and agricultural), the \r\nnumber of bankers indicating a greater willingness to make such \r\nloans far outnumber those less willing to make these loans. \r\nCurrently, the prime rate at the banks ranges from 5-1/4 to 10 \r\npercent, with an average of about 7-1/2 percent. Most indicated that \r\nabout 10 percent of their loan portfolio was lent at the prime rate \r\nand another 25 percent was lent at rates tied to prime.\nMost of the respondents do not expect the demand for loans to pick \r\nup significantly this year. However, about 30 percent do expect some \r\nincrease, particularly in the demand for real estate, consumer, and \r\nagricultural loans. Virtually none of the bankers expect to reduce \r\ntheir prime rate in the near future.\nFor the district as a whole, there has been little improvement in \r\neconomic conditions in recent weeks. Registrations of new \r\nautomobiles have picked up somewhat, and department store sales show \r\nsome improvement. Total nonagricultural employment rose slightly in \r\nthe district states, but manufacturing employment continued its \r\ndecline. The seasonally adjusted Texas Industrial Production Index \r\nfor February remained essentially unchanged from that in January. \r\nAnd oil allowables announced for April were unchanged from March. \r\nThe district petroleum industry is believed to be producing close to \r\ncapacity at these rates.\r\nDry weather conditions remain the principal \r\nconcern for agricultural operations over most areas of the district. \r\nExcept for the extreme eastern part of the district, the condition \r\nof pastures and ranges as well as cattle has fallen below the ten-year average.\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/1971/1971-04-sf

"Beige Book Report: San Francisco\nApril 6, 1971\nThe general opinion of businessmen and bankers in the twelfth \r\ndistrict is that the economy is beginning a period of gradual \r\nexpansion. Some sectors are experiencing more noticeable rates of \r\ngrowth, especially compared to recent months-residential housing and \r\nwood products are examples-but other sectors continue to experience \r\na slow rate of activity. There is no sign of a major increase in \r\nbusiness capital expenditures. Overall, despite some areas of \r\nstrength, the recovery is proceeding at only a moderate pace.\nResidential housing construction is reported as having favorable \r\nprospects in most of the district. Idaho and Utah have a strong \r\ndemand for single-family housing and also for apartments. Vacancy \r\nrates in cities like Boise and Salt Lake City are below one percent. \r\nIn the Pacific Northwest housing starts are recovering and the \r\ndemand for mortgages is increasing. The one big exception is \r\nSeattle, as would be expected, where the fall in aerospace \r\nemployment continues to exert its depressing effects. In that \r\nmarket, apartment vacancies are in the 10-15 percent range. But for \r\nother parts of Washington and in the State of Oregon, residential \r\nconstruction is expected to be up by 1% to 6% over 1970, depending \r\non the city.\nA similar pattern of greater residential construction activity is \r\nfound in California. The emphasis of builders is on low to medium-\r\npriced units, both houses and apartments. Higher priced houses are \r\nselling relatively slowly in most areas. Arizona is maintaining \r\nrecord rates of construction activity with continued low vacancy \r\nrates.\nBecause of the slow increase in housing demand in the past year and \r\nthe consequent problems for builders, the amount of speculative \r\nbuilding is relatively small in most states. Even with the recovery \r\nof demand, builders are tending to limit themselves to \"pre-sales.\" \r\nThe few speculative houses are usually model homes or the result of \r\nefforts of larger builders to keep their crews together. Part of \r\nthis situation is a reluctance of builders to overextend themselves \r\nin view of difficulties they have had in the past, and part is due \r\nto difficulties in obtaining financing for speculative projects.\nOn the other hand, speculative builders have continued their \r\nactivity in parts of Orange and Ventura counties in southern \r\nCalifornia and around San Jose in the north. These areas already \r\nhave above-average vacancy rates and they have rising aerospace \r\nunemployment, so that an overbuilt situation may arise. One Director \r\nreported some concern that Arizona, which has attracted large \r\nnational builders, may find itself facing an overbuilt situation \r\nlater in the year. With these exceptions, the level of construction \r\nis being closely geared to demand.\nConstruction costs are expected by most Directors to rise as new \r\nwage contracts are negotiated. Even in areas with lower levels of \r\nconstruction activity, unions are expected to press for increases. \r\nThe national pattern of wage increases, it is suggested, provides an \r\nexample that tends to be followed regardless of local conditions, \r\nand quick settlements may be difficult to achieve locally. Expected \r\nannual increases in wage contracts range from 5 to 10 percent.\nRetail sales are showing a mixed trend that is consistent, on \r\nbalance, with a gradual rate of economic expansion. Sales in some \r\nareas are described as disappointing, and consumers' attitudes as \r\ncautious. One southern California banker reports auto dealers as \r\nexpressing dissatisfaction over sales, but another banker in Oregon \r\nreports that auto dealers in his area are experiencing significantly \r\nhigher sales. No major increases are reported in manufacturing that \r\nwould suggest a strong general expansion.\nOne industry that is recovering is wood products and timber, but \r\nthen that industry had undergone a serious decline in 1970. A large \r\nhardwood manufacturing company, benefiting from the expansion in \r\nhousing production has decided to proceed with a new eastern plant, \r\nthe construction of which had been postponed but other industries \r\nare still experiencing difficulties. One national food company, \r\nfacing higher labor and other costs, is searching for ways of \r\nreducing numbers of employees; competitive conditions in the \r\nindustry make it difficult to retrieve higher costs by raising \r\nprices. Other companies say they are maintaining cautious attitudes, \r\nespecially where capital expenditures are concerned.\nBankers report little change in loan demand and most, but not all, \r\nhave lowered interest rates on their time and savings deposits in \r\nline with national trends. Some individual banks have continued to \r\noffer consumer-type time certificates at their previous rate levels \r\neven though their local competitors have cut their rates. Arizona is \r\none area where both banks and savings and loan associations have not \r\ncut rates on passbook savings accounts. A high local demand for \r\nfunds has reduced the pressures to cut the rates paid depositors. In \r\nother states, most banks have cut deposit rates.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-04-mi

"Beige Book Report: Minneapolis\nApril 6, 1971\nThe general feeling among area businessmen and bank Directors is \r\nthat consumer confidence in the ninth district is still at a low \r\nebb, and there are few indications that it has improved over the \r\nlast month or so. Business loan demand continues to be very strong \r\nwhile consumer loan demand is still weak. Price shading at both the \r\nwholesale and retail level does not seem to be any more prevalent \r\nthan it was a few months ago, but there are some indications that \r\nfirms are determining their prices more carefully.\nThere is little to suggest that consumer confidence in this district \r\nhas changed over the last month. With three exceptions, the \r\nDirectors of this bank were not aware of anything that would point \r\nto an imminent rise in consumer spending, two Directors who could \r\nnot cite anything specific had a general feeling that consumer \r\nspending in their areas was generally better than had been \r\nanticipated. Another also felt that although there was some firming \r\nup in his area, the mix of expenditures has been changing. For \r\nexample, motorcycle and snowmobile dealers have been experiencing \r\nrecord sales, but automobile purchases are down. Housing is the only \r\ndistrict sector that seems to be gaining strength.\nTwo Directors \r\n stated that real estate loan activity in their banks was increasing \r\n and more people were contemplating home purchases in their areas. \r\n One, however, noted that most of the turnover was in existing \r\n housing and new construction had not yet begun to improve. In \r\n contrast to the generally weak business loan demand in other parts \r\n of the country, the demand for business loans in the ninth district \r\n appears to be quite strong. Conversations with three reserve city \r\n bankers revealed that the rise in their business loans is stronger \r\n than they had anticipated, and some of these people felt that the \r\n recent cuts in the prime rate were unjustified, at least for their \r\n banks. One Director, who is also the president of a reserve city \r\n bank, said that although he keeps expecting his bank's outstanding \r\n loan balances to fall, they keep rising to new highs. He feels that \r\n a possible explanation for this phenomenon is that his national \r\n customers have tended to ignore the corporate bond market as a \r\n source of debt funds and instead are relying on banks for their \r\n borrowings.\nThree other Directors from rural areas in the district also felt \r\nthat loan demand was picking up. Although they were not sure of the \r\nreasons for the strengthening, they were able to cite instances \r\npointing to a rise in loan demand. One South Dakota Director said, \r\nfor example, that a number of banks in his area had dropped out of \r\nparticipation pools because they were able to use all their loanable \r\nfunds for local borrowers. Consumer loan demand, on the other hand, \r\nhas not changed significantly over the past month or so and still \r\nseems to be generally weak. While three Directors felt that they \r\nhave noticed some slight strengthening in their areas, for the most \r\npart they could not attribute the change to anything specific.\nDespite the strength in business loan demand and the weakness in the \r\nconsumer sector, most of the softening in interest rates has been in \r\nthe business sector, primarily because of the reductions in the \r\nprime rate. Generally, consumer loan rates have not changed although \r\none Director stated that his bank is shading rates to good \r\ncustomers.\nMortgage rates in the Twin Cities have remained relatively stable \r\nover the last month. The going rate on FHA-VA mortgages is now \r\nrunning at 7 percent plus 2-3 points to the seller, and the \r\nconventional mortgage rate is around 7-1/2 percent with 25 percent \r\ndown and 30-year maturities. There is some talk among industry \r\npeople, however, that the conventional rate will soften because of \r\nthe recent reductions in mortgage rates in other parts of the \r\ncountry and the strong liquidity positions of district thrift \r\ninstitutions.\nPrice shading does not seem to be more prevalent in this area, but \r\nwholesalers and retailers appear to be watching their prices more \r\ncarefully. Only one Director was aware of any changes in mark-offs \r\nduring the past few months, and these were generally limited to \r\noffice machines. Another commented that he has noticed some firms \r\nraising prices but then selectively making concessions. On the other \r\nhand, a number of cases of more aggressive pricing and merchandising \r\nemerged. In the utility industry, some suppliers have cut prices on \r\ntransformers and aluminum wire, while several announced price \r\nincreases have been rescinded because others refused to follow the \r\nrise. In addition, retailers are merchandising their wares more \r\naggressively in an attempt to get people into the stores. According \r\nto one Director, at least, this practice has been successful in his \r\narea, and retail sales have been picking up.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-04-bo

"Beige Book Report: Boston\nApril 6, 1971\nPreliminary end-of-month reports strongly suggest that March is \r\nturning out to be a month of \"no change\" at nearly all levels of \r\nbusiness and industry. These results come as a disappointment, as \r\nmost retailers and manufacturers seem to have pinned their hopes for \r\na recovery from mid-winter levels of activity on the February-March \r\nperiod.\nArea financial institutions face much the same conditions that \r\nprevail elsewhere in the nation. Deposit flows continue strong, even \r\nat institutions which have dropped offering rates on deposits. \r\nPassbook rates have been cut at individual large commercial banks in \r\nboth Massachusetts and Rhode Island, and several more seem to be on \r\nthe verge of following. To date no major regional thrift \r\ninstitutions have moved down on rate offerings, although at least \r\none is known to be planning a cut to 4 1/2 percent on regular \r\npassbook accounts on April 1. Our commercial bankers report a very \r\nslow demand for auto financing, with one large New Hampshire bank \r\nreporting auto sales in the Manchester region running 15 percent \r\nbelow the first 3 months of last year. Mortgage applications, on the \r\nother hand, are now running at increased levels at nearly all \r\ninstitutions, and the downward trend in mortgage rates seems to be \r\nslowing.\nReports from area retailers indicate unusual slowness in the late \r\nFebruary-March period, even compared with January levels of sales. \r\nAt the manufacturing level, two of our respondents noted a newly \r\ndeveloping weakness in foreign levels of demand. This development \r\nhad not previously been reported, and is taken quite seriously by \r\nthe firms involved in light of the prevailing domestic sluggishness. \r\nTwo leading regional machine tool producers were contacted, and \r\nconcurred in their expectations that the dollar volume of 1971 \r\nshipments will fall below the depressed levels of 1970.\nProfessor Wallich expects some decline in long-term rates by \r\nmidsummer, as the current level of corporate demand for loanable \r\nfunds is not commensurate with sluggish consumer behavior and \r\nreasonable projections of corporate profit levels for 1971. He sees \r\n6.80 to 6.90 percent as a 1971 floor for AAA corporate rates, \r\nhowever, and suggested that the historical yield spread between \r\ncorporate issues and mortgage rates may preclude much further \r\ndecline in the latter.\nWallich expressed the view that monetary policy has done about all \r\nit can do on the stimulative side, and that the case for further \r\nfiscal action is becoming increasingly clear-cut. While \r\nacknowledging its slowness, Wallich would choose investment stimulus \r\nas the preferable fiscal measure.\nEli Shapiro disagreed with Wallich on the likely level of long-term \r\nrates by late summer, stating his view that rates on AA corporates \r\nwill be in the 6.5 to 6.7 percent range by that time. Shapiro feels \r\nSystem policy has been right on the button since last winter, and \r\nfeels no need for immediate supplementary fiscal action. If, \r\nhowever, consumer demand levels are not stronger by mid-summer he \r\nwould support a temporary tax cut. Shapiro further expressed his \r\nsatisfaction with developments in the stock market, stating that the \r\nhigh volume trading combined with frequent price reversals is a \r\nhealthy situation.\nProfessor Samuelson had few comments this month apart from \r\nsuggesting once again that the System should be pushing hard to \r\nachieve a higher growth rate in the monetary aggregates.\nProfessor Eckstein now sees a $22 billion first quarter GNP gain. \r\nWhile this is lower than warranted by the $1043-1048 billion school \r\nof forecasters, he has not revised his own $1045 billion forecast as \r\nhe feels the Social Security tax action and recent investment \r\nsurveys largely offset the first quarter weakness. Noting the DRI \r\nprojections of a consumer savings rate at 7 1/2 and 8 percent in the \r\nfirst and second quarters of this year, Eckstein sees a definite \r\nneed for a temporary tax cut at this time.\nAll four academic respondents commended the System for its recent \r\nefforts to work in the long end of the rate structure, and expressed \r\nthe hope that continued efforts will be made along these lines.\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/1971/1971-03-sf

"Beige Book Report: San Francisco\nMarch 9, 1971\nThere has been no basic change in the attitudes of businessmen in \r\nthe Twelfth District. They see little sign of further declines in \r\neconomic activity, but they also see little sign of an immediate \r\nrecovery. To some extent, this situation is a reflection of \r\ncontinued cautious spending by consumers. Banks report continued \r\nincreases in deposits, but no equivalent rise in loan demand.\nMost of the businesses contacted in the District report no change in \r\ntheir spending plans. They are awaiting further increases in orders \r\nbefore instituting expansion plans. There are regional variations \r\nfrom this general picture. In Arizona, new orders were up in \r\nFebruary after two months of declines, and production is at the \r\nhighest level since last March. In Utah, mining and manufacturing \r\nare doing well, but in Southern California, the problems of Lockheed \r\nare causing some concern and adding to feelings of uncertainty. Many \r\nvacant industrial properties in Southern California are on the \r\nmarket without much interest being expressed at this time by \r\nprospective tenants. On the District level, business inventories \r\nhave stabilized at present levels and further declines are unlikely.\nThe level of unemployment has stopped rising in most areas. Small \r\nemployment increases are reported in Arizona and Southern \r\nCalifornia, but Washington continues to have problems as the rate of \r\nregistered unemployment was higher again February.\nOne industry that is expecting a mild recovery is lumber and plywood \r\nmanufacturing. Production is rising and some mills have reopened in \r\nOregon and Washington. Although lumber prices have risen, some \r\nmanufacturers feel that the upward pressure may diminish somewhat \r\nbetween now and the spring building season.\nConsumer spending has been cautious. Retailers have reported some \r\nsuccessful post-Christmas sales, but the volume was approximately \r\nthe same as in 1970. Consumers are not making greater purchases of \r\nbig-ticket items, such as refrigerators and furniture, and they are \r\nvery price-conscious in their buying attitudes. Generally, sales of \r\ndurables are sluggish. Another aspect of this same situation is a \r\nhigher rate of repayments on consumer credit. Overall, retail sales \r\nare only slightly higher than in the same period last year, but \r\nretailers expect the sales picture to improve later in the year.\nAutomobile sales reflect this greater caution on the part of \r\nconsumers. In most areas, sales are described as slow and this is \r\ntrue even in such otherwise buoyant areas as Arizona, where auto \r\nsales are at approximately the same level as last year. The one \r\ncategory generally singled out as registering increasing sales is \r\nthat of foreign-made cars, there are also some reports that sales of \r\ndomestic compact cars and used cars are relatively strong.\nBanks continue to experience rising deposits but little change in \r\nloan demand. Business loan demand is stable, despite efforts of \r\nindividual banks to generate more loan activity. There has been no \r\nmarked increased in mortgage demand, despite lower interest rates. \r\nIn particular, savings and loan associations have had difficulty in \r\ngenerating sufficient loans to utilize their heavy inflow of \r\nsavings. The savings and loans are attracting some funds because \r\nthey have not lowered their interest rates, while banks have cut \r\ntheir CD and consumer-type deposit rates. Some banks report that \r\nthey are considering the possibility of lowering the passbook \r\nsavings rate, but none has done so yet. There are some banks, \r\nhowever, that have not cut their CD and time deposits rates. Most of \r\nthese are smaller banks, with the exception of one large California \r\nbank that is actively promoting its higher rates on consumer-type \r\ntime deposit. In summary, the banks have sufficient funds to meet an \r\nincrease in loan demand, and in the meantime, there is downward \r\npressure on interest rates.\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/1971/1971-03-sl

"Beige Book Report: St Louis\nMarch 9, 1971\nThe trend of business conditions in the Eighth Federal Reserve \r\nDistrict is generally unchanged from the moderate uptrend reported a \r\nmonth ago according to a number of businessmen that were \r\ninterviewed. Although most reporters indicate that recent levels of \r\nactivity are insufficient to support much optimism, all expect \r\nsubstantial gains before the close of the year. Retail sales are \r\nrunning slightly ahead of a year ago on a dollar basis. Home-\r\nbuilding is likewise stronger. The employment situation, however, is \r\ngenerally stable with few hirings and a relatively high level of \r\nunemployment. No early improvement is seen in capital investment, \r\ndespite lower credit costs. Financial agencies report rising \r\navailability of both short- and long-term credit.\nSome large retailers report that post-Christmas sales continued \r\nahead of year-ago levels through February, but that the increase was \r\nsomewhat less than anticipated on the basis of the sharp pre-\r\nChristmas gains. The increase from a year ago was only sufficient to \r\noffset price increases. Sales in real terms, however, are believed \r\nto be higher on a seasonally adjusted basis than during the autumn \r\nmonths.\nMost manufacturers made their major retrenchment moves in late 1970 \r\nor in January of this year, but further moderate employment \r\nreductions were announced in February. These layoffs, however, were \r\nprobably offset by employment gains in the services, trade, and \r\nconstruction industries. Most of those interviewed expect \r\nunemployment to continue relatively high through the spring and \r\nsummer months, reflecting both the conservative attitude of \r\nbusinessmen in hiring and an increase in the labor force.\nHome-building continues to be the brightest feature on the business \r\nhorizon. All phases of this industry, including lumber, plywood, and \r\nespecially the construction of lower priced homes, report more than \r\nseasonal gains from levels of last summer.\nDespite the generally increased optimism by businessmen since the \r\nturn of the year, no early improvement in capital spending is \r\nforeseen. Few manufacturers appear willing to risk investment in \r\nmajor expansion projects at this stage. Exceptions include one \r\nretailer who reported a moderate increase in investment plans, and \r\nthe utilities, which were not seriously affected by the slowdown. \r\nUtilities continue to expand to meet longer run demand projections. \r\nOtherwise, the investment slowdown continues, and little optimism is \r\nfound for an early resumption of capital spending at levels existing \r\nbefore the slowdown.\nFinancial corporations reported further increases in liquidity \r\nduring recent weeks. Mortgage rate reductions have so far been \r\nrelatively small, but some agencies state that excessive quantities \r\nof credit are available at the quoted rates, pointing to further \r\nrate reductions. A number of savings and loan associations are now \r\nadvertising for borrowers, and one commercial bank indicated that \r\nnet income this year will be well below 1970 levels because of the \r\nsharp decline in bank lending rates.\nRespondents, in general, expect the rate of inflation to continue to \r\nsubside through 1971. The agriculture and food sectors may tend to \r\npush prices up in the second half of the year, in contrast to the \r\ndownward influence of these sectors in late 1970. Farm commodity \r\nprices fell sharply late last year, but meat and other livestock \r\nproduct prices have already turned upward. With reduced supplies in \r\nprospect in the Third and Fourth Quarters, further increases in such \r\nprices are expected.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-03-ri

"Beige Book Report: Richmond\nMarch 9, 1971\nSurveys of businessmen and bankers in the Fifth District indicate \r\ngeneral agreement on the following points: (1) some improvement in \r\nmanufacturers' shipments, volume of new orders, and backlogs of \r\norders; (2) significant further improvement in retail sales, \r\nincluding automobiles; (3) stability in the employment situation, \r\nbut no clear evidence of improvement; (4) further reductions of \r\nprices in manufacturing, but not in retail goods and services; (5) \r\nsharp improvement in residential construction, and some increase in \r\nnonresidential construction; (6) substantial increases in mortgage \r\nloan demand, and slight increases in consumer loan demand, but no \r\nsignificant improvement in business loan demand; and (7) a generally \r\nmore optimistic outlook regarding future business conditions.\nDistrict manufacturers report an improvement during February in \r\ntheir shipments, volume of new orders, and backlog of orders. This \r\nis the first significant improvement in the sentiment of District \r\nmanufacturers since September. Improvement is reported by important \r\nproducers in ferrous metals, metal products, furniture, hosiery, and \r\nsynthetic fibers.\nRetail sales improved further during February according to District \r\nbankers and businessmen in trade and services. Automobile sales \r\ncontinued the sharp upswing begun in January.\nManufacturers report that inventories have declined somewhat in \r\nrecent weeks, while retailers' inventories have tended to increase \r\nin line with seasonal expectations.\nWhile some further declines in employment are reported by District \r\nbankers for their respective areas, some improvement is reported by \r\nDistrict manufacturers. Also, manufacturers report no significant \r\nchange recently in the length of the workweek. On balance, the \r\nDistrict employment situation appears to have stabilized, although \r\ndefinite improvement is not yet clearly in evidence.\nSome further reductions in prices are reported by manufacturers in \r\ntextiles, electrical equipment, nonferrous metals, and coal. \r\nBuilders materials producers, however, report price advances, and \r\nretailers indicate that prices of consumer goods and services are \r\ncontinuing to rise on balance. Continued upward pressure on wages is \r\nreported by respondents across the Board.\nConsiderable improvement in residential construction activity is \r\nreported for February by District bankers in South Carolina, North \r\nCarolina, Virginia, and Maryland. Nonresidential building activity \r\nis also reported significantly improved. Comments received from \r\nsurvey respondents indicate a recovery in progress in the \r\nconstruction field.\nMortgage loan demand in District banks is reported to have improved \r\nsharply during February. Consumer loan demand also increased \r\nslightly, according to bankers. Business loan demand, however, still \r\nis reported down in February, but not as depressed as it had been \r\nfor the previous three months.\nThe general outlook of survey respondents improved substantially in \r\nrecent weeks. Comments received from respondents indicate growing \r\noptimism concerning consumer spending, residential construction, \r\nemployment, and prices. Some continuing strikes and the prospects of \r\nthe strikes during the current year, however, contribute some \r\ncaution to respondents' outlooks. Manufacturers, who have pared down \r\ncapital expansion plans rather sharply in recent months, continue to \r\nindicate no significant desire to increase spending in this area in \r\nthe near future.\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/1971/1971-03-su

"Beige Book: National Summary\nMarch 9, 1971\nThere is substantial agreement among bankers, businessmen, and \r\neconomists that the recovery now underway is of moderate proportions \r\nand is clearly not strong enough to have a significant impact on the \r\nemployment-unemployment situation over the near term. Despite the \r\npersistence of underlying slack in the economy, the Reserve Banks \r\nnote little retardation of the rise in both industrial and consumer \r\nprices. In view of the sluggish demand conditions in the capital \r\ngoods sector and disappointing retail sales, it appears that cost-push influences continue to fuel the inflationary momentum. Some \r\nrecent financial developments mirror the sluggishness in the real \r\nsector. Bankers report that loan demand is relatively weak. They are \r\nconcerned over the decline in short term interest rates, and there \r\nis widespread agreement that the System should not move toward \r\nfurther monetary ease at this time.\nWith few exceptions, the Reserve Banks report that retail trade in \r\nJanuary and February was not particularly strong. The post-strike \r\nrebound in auto sales thus far appears to be less robust than \r\nexpected. Both San Francisco and Kansas City commented on the cost-\r\nconscious auto buyer. Sales of small cars (foreign and domestic \r\ncompacts) are providing the major impetus to an otherwise lackluster \r\nauto picture. A number of Reserve Banks mentioned, in one form or \r\nanother, that restoration of consumer confidence is the key element \r\nin the business picture. According to the Boston Bank, retail credit \r\nmen in Rhode Island attribute cautious consumer spending to \r\nunemployment and the fear of layoffs. Dallas comments that bankers \r\nin their district feel continued inflation has tended to dampen \r\nconsumer confidence and spending.\nThe Banks uniformly report that current and prospective capital \r\nspending remains weak, except for the push stemming from the \r\nutilities. Businessmen want to see concrete evidence of a solid \r\nupturn in economic activity before they begin to increase capital \r\noutlays. Cleveland mentioned that recovery in computers and machine \r\ntools is not expected until yearend or early 1972, while Boston \r\nnotes that prospects are now better for a pickup in machine tools by \r\nyearend.\nThe only areas consistently mentioned by the Reserve Banks as \r\nexhibiting strength were capital expenditures by utilities, steel \r\nproduction, and residential construction. Boston, however, commented \r\nthat improvement in housing related industries has been \r\ndisappointing. As mentioned by Cleveland in the last Red Book, \r\nChicago and Kansas City this time attribute part of the strength in \r\nthe steel industry to buying in anticipation of expected price \r\nincreases.\nConcerning the outlook for employment and unemployment, there are \r\nwidespread indications that businesses plan to continue with \r\ncautious hiring policies (and in some instances plan further \r\nlayoffs). As is the case for capital spending, there is a reluctance \r\nto hire additional employees until the recovery gathers momentum.\nOn the financial front, the Reserve Banks generally report weak loan \r\ndemand from consumers and businesses. The exceptions are a pickup in \r\nmortgage demand and in loans to finance steel stockpiling. Bankers \r\nare generally concerned about the decline in short-term interest \r\nrates and a developing profit squeeze. Atlanta mentioned that \r\nreductions in interest rates and increases in the availability of \r\ncredit are encouraging signs for auto sales and construction. \r\nCleveland directors specifically noted that they would oppose any \r\nfurther cuts in the discount rate because of an expected adverse \r\nreaction from foreign central bankers. The academic economists from \r\nBoston urge no further ease in monetary policy.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1971/1971-03-mi

"Beige Book Report: Minneapolis\nMarch 9, 1971\nUnemployment, seasonally adjusted, in the Ninth Federal Reserve \r\nDistrict has tended to remain at around 5 percent of the labor force \r\nsince last fall, and there are no strong indications that it will \r\nchange significantly over the next few months. Although businessmen \r\nhave generally become a little more optimistic in their sales and \r\nprofits expectations. This is not reflected in their planned capital \r\nexpenditures or hiring policies. The directors of this bank were \r\ngenerally disappointed in President Nixon's decision to suspend the \r\nDavis-Bacon provisions regarding the payment of union wages on \r\nFederal and Federally assisted construction projects, preferring \r\nsomewhat stronger actions to reduce the rate of inflation.\nAlthough there are some notable exceptions, the directors of this \r\nbank feel that businessmen in the Ninth District are slightly more \r\noptimistic than they were a few months ago. Businessmen in general, \r\nhowever, have postponed the expected turnaround date and now feel \r\nthat the pickup in activity will not come until the second half of \r\nthe year, and then only gradually. As a result, they are still very \r\ncautious in both their capital expenditure and hiring policies. \r\nBusinessmen who are not anticipating a pickup in sales this year are \r\nprimarily located in the extreme eastern and western portions of the \r\nDistrict. In addition, one large Twin Cities manufacturer, who had \r\nlarge layoffs in 1970, is concerned enough about the outlook to be \r\npredicting further layoffs if business does not improve.\nThe cautious hiring policies of area businessmen is evident from \r\nactivity at State Employment Service offices. A telephone survey of \r\n22 nonmetropolitan Minnesota State Employment Office managers \r\ndisclosed that employers in their areas generally have no plans to \r\ndo any other-than-seasonal hiring in the next few weeks. Also, 17 of \r\nthese managers indicated that some unemployed workers had returned \r\nto their home areas from the Twin Cities.\nThe results of our latest quarterly industrial expectations survey, \r\ntaken early in February, tend to confirm the observations of the \r\nbank directors. The survey's manufacturing respondents do not \r\nforesee any significant sales improvements in the early months of \r\nthis year. But sales should rise later this spring and continue to \r\nimprove throughout the third quarter. Although sales are expected to \r\nmatch last year's levels in the current quarter, they are \r\nanticipated to be 3.6 percent higher than a year earlier in the \r\nsecond quarter, before advancing 8.8 percent in the third.\nThe expected improvement in district industrial sales later this \r\nyear can be traced to durable goods manufacturers, primarily those \r\nin the electrical and nonelectrical machinery industries. Both of \r\nthese industries have had severe drops in sales over the last year, \r\nbut expect to rebound quite sharply by the third quarter of this \r\nyear. In addition, manufacturers in the primary metals, fabricated \r\nmetals, transportation equipment, and scientific instrument \r\nindustries expected strong increases in third quarter sales.\nSales gains in the nondurable goods industries are not expected to \r\nbe as dramatic as in durable goods industries, but these \r\nmanufacturers also foresee definite improvements by the third \r\nquarter.\nFor the most part, the directors of this bank expressed \r\ndisappointment with President Nixon's recent suspension of the \r\nDavis-Bacon Act provisions and felt that substantially stronger \r\naction was needed. One director felt that the unions \"called his \r\nbluff, and that (President Nixon's) action was a weak-kneed backdown \r\nafter all that conversation.\" Construction people privately feel \r\nthat suspension of the Davis-Bacon Act will have no effect on the \r\nrise in construction costs. One director, while disillusioned with \r\nthe president's specific action, did feel that further steps could \r\nbe taken in the future if construction costs continue to rise. \r\nAnother director, who is opposed to wage and price controls in \r\nprinciple, favored the Administration's action to suspend the Davis-Bacon provisions. According to him, the\nDavis-Bacon Act supported \r\nartificially high construction wages in his area, and wages will not \r\nreturn to normal levels.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1971/1971-03-at

"Beige Book Report: Atlanta\nMarch 9, 1971\nReports from business leaders reveal that 1971 is off to a slower \r\nstart than even they had predicted, especially in the area of retail \r\nsales nevertheless, most businessmen and bankers think there is some \r\nreason for cautious optimism. Inflation is still causing concern.\nRetailers report that 1971 sales are off to a disappointing start. \r\nFor example, an auto dealer describes his sales as up one week down \r\nthe next. A major department store concern indicates slow January \r\nand February sales and that prices are still rising. Also, customer \r\ndelinquencies are twice their\nyear-ago level. The President of a \r\nluxury jewelry firm says\nhigh-priced merchandise is still selling \r\nslowly, but that moderate-priced lines are moving well. He added \r\nthat watch and diamond prices have not been going up. A \r\nrepresentative of a major appliance manufacturer reports that his \r\ncompany has not noticed a turnaround in consumer spending. Added \r\nevidence of weakness in retail sales is indicated by the behavior of \r\nsales tax receipts, which have risen only slightly in some areas.\nThere are other signs that business is only stabilizing rather than \r\nexpanding strongly. Telephone revenues from commercial and corporate \r\naccounts, especially for long distance calling, have been rising \r\nsluggishly although residential demand has remained strong. A \r\ndiversified electrical manufacturer reports that the only area of \r\nhis business with a substantial backlog is electric generating \r\nequipment. According to a paper producer, newsprint sales were weak \r\nin January. Also, aerospace-related layoffs have occurred in a few \r\nareas. A firm that fabricates metal for aircraft parts is reported \r\nto be cutting its overhead by $30,000 per month. A leading apparel \r\nmanufacturer in Tennessee, previously a very steady employer, \r\nrecently laid off workers.\nNevertheless, reports from businessmen and bankers throughout the \r\nDistrict indicate that confidence is building. Some optimism is \r\nbeing generated by reductions in interest rates and increases in the \r\navailability of financing. An auto dealer is encouraged by \r\nreductions in his interest expenses, which he expects will permit \r\ngreater merchandising efforts that, in turn, should help improve the \r\nretail market. Construction activity is strong in several areas, \r\nwith interest rate reductions expected to encourage further revival. \r\nHowever, there have been rumors of vacancies in some apartments \r\ncatering to singles.\nPrice increases continue, especially in utility rates, and inflation \r\nremains a concern. Construction industry representatives do not \r\nthink the repeal of the Davis-Bacon Act will have much impact.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-03-cl

"Beige Book Report: Cleveland\nMarch 9, 1971\nThe consensus view of an informal survey of several of our directors \r\nis that there is a considerable amount of optimistic talk about the \r\neconomic outlook at the senior management level in major firms in \r\nthe Fourth District and elsewhere. The optimism, however, is \r\ntempered with caution resulting from a lack of specific evidence \r\nsignaling an upturn in overall activity or at the individual firm \r\nlevel. As a result, many firms, especially capital goods producers, \r\nare pessimistic about a quick resurgence in economic activity, but \r\nexpectations of improvement near the end of 1971 or in early 1972 \r\nare reported to be widespread.\nOne director, the president of a large manufacturer of computers and \r\nbusiness machines, reported that the ready availability of credit, \r\ndeclining interest rates, and expectation of stimulative fiscal \r\npolicy in fiscal 1972 have generated some optimism, although many \r\nbusinessmen remain uncertain about the time paths of the expected \r\nrecovery. The key element in the business picture, according to this \r\ndirector, is the consumer. Once consumer spending picks up and \r\nutilization of existing plant and equipment returns to near-capacity \r\nlevels, business spending for additional plant and equipment will \r\nincrease and the recovery process will be underway. This director \r\nindicated that sales of cash register equipment have held up \r\nrelatively well, in spite of numerous postponements of new store \r\nlocations by major retail chains. Computer sales, on the other hand, \r\nhave been severely depressed and are not expected to recover until \r\nyearend or early 1972.\nA second director, who is the chairman of a large diversified \r\nmanufacturing firm (major divisions include auto components, defense \r\nand space products, and electronics), expressed the view that \r\neconomic activity will probably improve during 1971. He also \r\nreported that there are a number of favorable \"straws in the wind\" \r\nfrom his firm's point of view: consumer-oriented products (radio and \r\nTV parts and auto components) have picked up; orders for offshore \r\noil drilling equipment have risen; sales of automated supervisory \r\ncontrol equipment have edged up slightly; and Government related \r\nbusiness has increased modestly. Furthermore, this director \r\nexpressed continued concern about inflation and indicated that he \r\nhas expressed directly to senior Administration officials strong \r\nsupport for the Government's actions in the construction industry. \r\nHe is convinced that the persistent irritation is the result of \r\ncost-push pressures. Some prices have declined and he believes that \r\nexcess capacity and competition would force businessmen to be more \r\nresponsive in pricing policies in the absence of continued excessive \r\nwage demands. This director also expressed the view that consumer \r\nconfidence is precariously balanced and that further \"bad news\" or \r\nunexpected shocks could further undermine consumer confidence and, \r\nthus, hamper the expected recovery in economic activity.\nA third director, the president of a major glassware and glass \r\ncontainer firm, reported that their new order backlog for consumer \r\nglassware is slightly higher than the year-ago level, reflecting an \r\nincrease in orders from retail chains. Glass container orders are \r\nabout equal to the early 1970 level. Orders for and shipments of \r\nindustrial glassware, especially home lighting equipment, are \r\nsignificantly above last year's level, as a result of the \"boom\" in \r\nhousing. This director also referred to the \"apparent optimism,\" but \r\nindicated that his own situation is very quiet, \"we're waiting\" and \r\n\"there is nothing stirring.\"\nA fourth director, the president of a medium-sized machine tool \r\nmanufacturing firm, reported that industry leaders are more \r\noptimistic about the chances of a recovery in business and in demand \r\nfor machine tools by the end of 1971 or early 1972 than they were \r\ntwo or three months ago. The renewed optimism is based, in part, on \r\ncurrent and expected stabilization policies and also on a recent \r\nsharp increase in requests from customers to see salesmen. So far, \r\nhowever, the flurry of activity has not been translated into an \r\nincrease in new orders. At the present time, order backlogs for the \r\nindustry are at the lowest level in several years, incoming orders \r\nare dismal, and as a result, employment has been sharply curtailed.\nOn the financial side, two bank directors have expressed strong \r\nsentiments to the effect that the System has gone \"far enough\" in \r\nreducing interest rates and they are prepared to oppose any further \r\nreductions in the discount rate. One banker-director, the chairman \r\nof one of the largest banks in the District, expressed grave concern \r\nabout the international repercussions of any further easing in \r\nmonetary policy, indicating that foreign central bankers will \"... \r\nnot fool around with us.\" This banker reported no pickup in business \r\nloan demand. This director also serves as a member of the Board of \r\nDirectors of several national firms, and he reports that the \r\nmanagement of these firms has no expectations of a quick turnaround \r\nin activity in the immediate future, especially in the manufacturing \r\narea.\nThe second banker-director, the chairman of a medium-sized bank in \r\nthe District, was opposed to any further easing of monetary policy \r\nin psychological grounds. He reported strongly held convictions that \r\nconsumer spending will not surge upward as long as there is a \r\nfeeling that \"... everything is going down.\" Banks have more than \r\nenough funds, interest rates keep falling, and individuals in his \r\narea are very concerned about reaching some sort of \"bottom\" from \r\nwhich a recovery can start. This director would like the System to \r\nhold steady on its present course (as he perceives it) and permit \r\nthe recovery to unfold. In his view, consumers could react in an \r\nadverse way to any further signs of monetary ease.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-03-da

"Beige Book Report: Dallas\nMarch 9, 1971\nAlthough bankers in the Eleventh District generally expect economic \r\nactivity in this area to improve over last year, weak loan demand \r\nand continued inflation remain worrisome. A recent survey of bankers \r\n(some of whom are head office and branch directors) from large- and \r\nintermediate-size banks reveal that, despite a general lowering of \r\ninterest rates, loan demand continues to be sluggish. Real estate \r\nlending has picked up slightly in some areas, but business and \r\nconsumer loan demands are generally weak. Since December, demand \r\ndeposits (not seasonally adjusted) have declined, while time and \r\nsavings deposits have risen moderately, permitting banks to lower \r\nrates paid on CDs. Loan demand in the District remains sluggish and \r\nnearly all respondents report no material change in recent weeks. \r\nThere has been some slight increase in real estate loans, especially \r\nat the smaller institutions, but both business and consumer \r\ninstallment loans are reported to have declined. Defense industry \r\nlayoffs and some uncertainty about the economic outlook probably \r\naccount for much of the weakness in loan demand. In addition many \r\nbankers note that continued inflation has tended to dampen consumer \r\noptimism and spending. However, pent-up demand for housing, coupled \r\nwith lower mortgage rates, has led to some increase in real estate \r\nloans.\nAll of the respondents reduced their prime rate recently, with most \r\nof the larger banks now quoting the New York prime rate. However, \r\nmany of the smaller banks report prime rates 1 to 1 3/4 percentage \r\npoints higher than those in New York. Presently the larger banks \r\ntypically carry 10 percent of their loans at the prime rate, while \r\nsmaller banks report carrying anywhere from 2 to 30 percent of their \r\nloans at prime. Nearly all of the banks surveyed do make mortgage \r\nloans; however, the smaller banks usually report holding a larger \r\nportion of their loan portfolio in mortgages. Current policy towards \r\ninvestment as well as loan portfolio management differs widely \r\nbetween the institutions surveyed. In general, the respondents \r\ncurrently hold 60 percent of their investment portfolios in U.S. \r\nGovernment securities. However, a few banks lean heavily on \r\nmunicipal holdings. At present, large banks typically hold 40 \r\npercent of their investment portfolio in municipal securities with \r\nan average maturity of eight years. Smaller banks generally hold a \r\nsomewhat larger amount of municipals, with a six-year average \r\nmaturity. Nearly all of the respondents report regular participation \r\nin the Federal funds market; however, few have outstanding \r\ncommitments with other banks for regular transactions. Of those with \r\noutstanding commitments, larger banks currently buy or sell from $2 \r\nto $15 million daily, while smaller banks trade from $0.5 to $3.5 \r\nmillion per day.\nProbably reflecting sluggish economic activity as well as seasonal \r\nfactors, demand deposits at most of the respondents' banks have \r\ndeclined since yearend. Demand deposit levels have generally fallen \r\n(5 to 10 percent annual rate)\u2014with some of the larger banks showing \r\neven a more substantial decline (15 to 25 percent). Total time and \r\nsavings deposits are up at most banks, as passbook savings deposits \r\nhave shown a moderate increase since December. Although many of the \r\nsmaller institutions do not issue large CDs ($100,000 plus), those \r\nthat do report a sizable volume of new issues since year-end.\nAlthough market interest rates have fallen across-the-board, nearly \r\nall of the banks surveyed are paying the ceiling rate on passbook \r\nsavings deposits. In the light of recent declines in money market \r\nrates, some of the respondents recommend that the Regulation Q \r\nceiling on savings deposits be lowered to 4 percent, although not \r\nuntil ceiling rates payable by savings and loan associations are \r\nlowered.\nRecent figures on economic conditions in the District seem to \r\nindicate continued slow growth. Although actual nonagricultural \r\nemployment for the District was down slightly in January, seasonal \r\nexpectations had suggested a much sharper drop. Retail sales for \r\nJanuary and early February are up 9 percent over last year\u2014a \r\npossible sign of some slight improvement in the consumer sector.\nIndustrial production has remained essentially unchanged with some \r\nsmall increase in manufacturing of both durable and nondurable \r\ngoods.\nTexas oils allowable for March are unchanged from February, which \r\nmakes them more than 5 percent lower than the record levels of last \r\nNovember. However, all other District states are now producing at \r\nrecord levels. In addition, District agricultural conditions appear \r\nto be improving. Expected acreage to be planted with sorghum and \r\nother grains is up 10 to 14 percent over last year. Placements into \r\nTexas feedlots during January increased 45 percent over the same \r\nperiod a year ago\u2014resulting in a new record number of cattle on \r\nfeed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-03-bo

"Beige Book Report: Boston\nMarch 9, 1971\nReports of moderate to disappointing conditions continue to \r\npredominate among our respondents in nearly every field. Area \r\nfinancial institutions show no material change over last month, with \r\nthe earlier spate of mortgage rate cuts tapering off, at least \r\ntemporarily. The pickup in orders in housing-related industry has \r\nthus far been disappointing and much less than commensurate with the \r\nlevel of starts expected later this year. Similarly, auto industry \r\nsuppliers report order levels below earlier expectations for the \r\npost-strike period. In summary, the economic pickup continues to \r\nelude us.\nThe winter recreational industry in New England has had a poor \r\nseason, with sales of both equipment and services below last year. \r\nThe traditional automobile sales held on Washington's birthday \r\nfailed to attract the normal interest this year, and dealers report \r\nonly a marginal improvement in sales over earlier in the winter. A \r\nsurvey of Rhode Island Retail Credit Grantors Association taken last \r\nweek provides additional evidence of the gloom in retailing. Asked \r\nto characterize current sales volume with that of six months ago, 63 \r\npercent replied that it was lower, and 10 percent stated it was much \r\nlower. Fear of unemployment and layoffs was identified by this same \r\ngroup as the major deterrent to higher consumer expenditures.\nOne of our directors, heading a highly diversified manufacturing \r\ncorporation, reports that price shading has broken out in a number \r\nof his divisions over the last three months. Order backlogs are \r\ncontinuing to shrink at most tool companies, although hopes now seem \r\nslightly higher for some pickup in new orders by the end of this \r\nyear. The aerospace industry continues to present a very mixed \r\npicture, with some firms adjusting well to the decline in defense \r\nprocurements and others suffering severely.\nProfessor Eckstein reports a slight retrenchment in the DRI model \r\nforecast of 1971 GNP, with the figure revised to $1,045 billion. He \r\nexpressed disappointment with the First Quarter GNP results as they \r\nseem to be developing. On the matter of strength in the housing \r\nsector, he noted a very poor conversion rate of permits into starts \r\nin the late months of 1970 and suggested that our January and \r\nFebruary start figures may be artificially high as a result.\nReiterating testimony given to the JEC last week, Eckstein once \r\nagain warned against excessive monetary stimulus. He continues to \r\nendorse a 5 to 6 percent growth target for Ml, but urges the system \r\nto push hard enough to achieve it. Eckstein expressed the hope that \r\nfears of a \"snapback\" effect will not deter the FOMC in its pursuit \r\nof stated targets, as this theory has little basis in fact. No \r\nsignificant snapback can be found in past recoveries once you take \r\nout inventory adjustments, a procedure that seems particularly \r\nappropriate in the current slowdown, since no major inventory \r\nchanges have accompanied it.\nProfessor Eli Shapiro expressed general satisfaction with the \r\ncurrent mix of fiscal and monetary policy, cautioning only that we \r\ndo not fall below 5 to 6 percent in monetary growth. Shapiro sees \r\nthe recent turnaround in long rates as largely an \"indigestion\" \r\nproblem, stemming from the flood of offerings that emerged when long \r\nrates declined to the 7 percent vicinity. He is confident that long \r\nrates will decline to that level again by late summer. Citing the \r\nescalating cost of construction, Shapiro expects starts over 1971 to \r\nreach no more than 1.75 to 1.8 million. Industrial and commercial \r\nconstruction should decline 4 to 5 percent in real terms from 1970 \r\nlevels. Shapiro further expects cuts to break out soon in passbook \r\nrates at thrift institutions and feels they are justified.\nProfessors Tobin and Samuelson expressed nearly identical views, \r\nwith both focusing primarily on the discrepancy between desirable \r\ngrowth rates of real output and what we're likely to achieve. Both \r\nendorsed a monetary target in the 7 to 9 percent range, attaching \r\nparticular urgency to this, as we are largely locked into a budget \r\nthat is only mildly stimulative, at best. Samuelson specifically \r\ndiscussed the notion that the system is now \"pushing on a string,\" \r\nsuggesting instead that we're in a period where the linkages between \r\nmonetary stimulus and real activity are very mushy, but still \r\neffective.\nProfessor Wallich added nothing new to his comments of earlier \r\nmonths and continues to feel that it would be ineffective now (and \r\nharmful later) to push any harder with monetary policy than we have \r\nbeen doing.\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/1971/1971-03-kc

"Beige Book Report: Kansas City\nMarch 9, 1971\nThe qualifiedly optimistic cast to Tenth District economic activity \r\nreported on last month would again seem to be borne out on the basis \r\nof reports from Directors and conversations with nearly two dozen \r\npurchasing agents representing manufacturing, wholesale, and retail \r\nfirms doing business both nationally and within the several District \r\nstates. As was the case last month, construction activity was \r\nsingled out as being a sector of considerable strength. In addition, \r\nsteel stockpiling is making a positive contribution to inventory \r\ninvestment on the part of several steel-using producers among those \r\nqueried. At the same time, retail trade thus far has failed to show \r\nany significant signs of buoyancy.\nIn a number of the District metropolitan areas, construction \r\nactivity appears to be quite strong. Retail trade, on the other \r\nhand, appears to be merely holding its own over year-ago levels. \r\nHowever, the auto component is a soft spot in the overall sales \r\npicture, with the major impetus to auto sales being provided by \r\nsmall cars. In Kansas City within recent weeks, Ford Motor Company \r\nhas announced some shaving of earlier first quarter scheduled \r\nproduction. The General Motors assembly plant in Kansas City, which \r\nturns out Buicks, Oldsmobiles, and Pontiacs, has not made any such \r\nannouncement and within the industry it is acknowledged that the \r\nPontiac Division is faced with the biggest job of rebuilding its \r\ndealer stocks-a fact that supports high activity levels for the \r\nKansas City assembly plant.\nLooking down the road to the outlook for the months ahead, one \r\nDirector in the steel fabricating business reported that work was \r\nbacked up and expressed optimism over the outlook for new orders. \r\nHowever, another Director voiced a good deal of concern over what he \r\nfelt to be a general lack of consumer confidence and expressed the \r\nview that, unless a turn in confidence could be brought about, he \r\nwas decidedly pessimistic about the economic outlook. Yet, this \r\nconcern about recession appeared to be a minority view on the part \r\nof most respondents. In terms of the responses of the purchasing \r\nagents, what was left unsaid may well have been as significant as \r\nthe information they volunteered. Last July, when these sources were \r\nqueried, their overall attitudes regarding the outlook were clearly \r\npessimistic. This time, none mentioned the danger of recession, and \r\nthe consensus was that moderate and continuing improvement in \r\neconomic activity was expected.\nWith respect to the price situation, both for the present and the \r\nnear term, the responses of purchasing agents suggested little \r\nabatement of inflationary pressures. As our sample included a large \r\nnumber of steel users, expectations of price advances came as no \r\nsurprise\u2014particularly since a number of these firms had purchased \r\nsteel under a one-year, no-price increase arrangement. At its \r\nexpiration, the purchasing agents expect sizable price increases to \r\nbe posted. However, even for those firms not heavily involved in \r\nsteel purchasing, they report that the cost of materials continues \r\nto rise at about the same rate as in past months, with little price \r\nshaving occurring. Given this price picture, despite expectations of \r\nan improved sales picture in the months ahead, inventory investment\u2014with the exception of steel as noted earlier\u2014is quite \r\nconservative. The view of one purchasing agent, that \"we are as low \r\non inventories as we can safely operate,\" would seem representative \r\nof the respondents as a whole. Cost consciousness is the overriding \r\nconsideration in inventory behavior and imports are utilized \r\nwherever cost advantages dictate. In terms of the prices which these \r\nfirms charge for their own outputs, cost increases of materials are \r\ncited as the basis for present and future price increases to their \r\ncustomers.\nOn the banking scene, developments seem to corroborate events in the \r\nreal sectors discussed above. Overall, loan demand remains weak, and \r\nthis is especially true for some of the large national accounts. \r\nWhile there has been little change in business loan demand during \r\nthe past month, an exception is those firms who are borrowing to \r\nfinance steel stockpiling. Loan demand on the part of locally based \r\nfirms appears to be relatively stronger than from national firms, \r\nand some slight pickup in loan inquiries is occurring. Some of the \r\nslack in business loan demand is being taken up by other loan \r\ncategories. For example, some bankers report a rather noticeable \r\nincrease in their participations from country correspondents. Also, \r\nthe demand for construction loans is strong.\nDeposit flows continue strong in both demand and time accounts, \r\nconsidering seasonal factors. The large banks have reduced rates on \r\nlarge CDs in line with the national market. In addition, the \r\nbeginning of some easing of rates on consumer CDs is appearing. For \r\nthe most part, however, banks appear to be willing to encourage \r\ndeposit growth in anticipation of an improvement in business loan \r\ndemand in the coming months. Some banks are now soliciting loans in \r\nan attempt to generate loan volume. In the meantime, excess funds \r\nare being placed mainly in Federal funds and other short-term liquid \r\nassets.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1971/1971-03-ch

"Beige Book Report: Chicago\nMarch 9, 1971\nThe $1065 billion GNP \"goal\" for 1971, announced by the CEA a month \r\nago, has been regarded with skepticism by observers in this \r\nDistrict. The consensus appears to continue to center on $1050 \r\nbillion. Nevertheless, the controversy appears to have an impact on \r\npsychology. The high figure for GNP, coupled with pressures for a \r\nmore expansive monetary policy from various sectors (including \r\nAdministration circles), is commonly taken to mean that \"the \r\ngovernment\" is determined to get spending rising rapidly, even at \r\nthe risk of a renewed acceleration of price inflation.\nDemand for workers of all degrees of skill and experience remains \r\nvery slow. Unemployment compensation claims in February continued to \r\nrun well above last year's levels in all areas of the District, \r\nexcept Michigan, where cutbacks in auto production schedules were \r\nunderway a year ago.\nStrikes are hampering output in many industries, although the \r\noverall impact is much less than during the GM dispute. At last \r\nreports, labor disputes had closed a laundry appliance manufacturer \r\nin Iowa, a machine tool producer in Illinois, an auto assembly plant \r\nin Wisconsin, and ready-mix concrete facilities in Indianapolis. \r\nLabor militancy is causing many employers to offer large increases \r\nin compensation in initial stages of negotiations, despite an ample \r\nsupply of potential workers.\nEvidence available in this District does not support Rinfret's \r\nrecent statement that total capital expenditures by business firms \r\nwill rise 11 percent in 1971. Orders for both capital goods \r\ncomponents and finished equipment remain slow. In the case of \r\nmachine tools and steel mill equipment, the situation is extremely \r\ndepressed. There is no prospect for an early recovery for commercial \r\nor manufacturing construction activity. The airlines are reducing or \r\npostponing acquisitions of new equipment wherever possible. \r\nRailroads and truckers would like to buy new equipment, but their \r\nfinancial resources are limited. However, capital outlays of \r\nutilities will be very strong and the petroleum industry expects to \r\nspend about 8 percent more in 1971.\nDemand for steel is at a very high level, but it is impossible to \r\ndetermine what share of current demand represents a desire to build \r\ninventories for strike protection. Orders are also stimulated by a \r\ndesire to anticipate price increases in mid-April and on June 1, \r\nwhen price moratoriums expire. A Chicago steel producer describes \r\ncurrent orders as \"fantastic,\" with no recent slackening from the \r\nhigh January level, as reported by some Eastern mills. This firm's \r\norder backlog is well above the backlog of the similar period of \r\n1968.\nSome observers of auto industry trends are puzzled by the apparent \r\ndiscrepancy between the 1 percent decline from a year earlier in \r\nretail sales of the automotive group in the January 1-February 20 \r\nperiod, as published by the Bureau of the Census, and the 13-percent \r\nincrease in dealer deliveries of passenger cars (at higher prices), \r\nreported by the auto manufacturers. We are told that some GM dealers \r\nare falsely claiming that some of the new cars they order are \r\nalready sold, in order to profit from contest incentives. Also, the \r\naverage size of car is less than a year ago. These factors appear \r\ninsufficient, however, to explain the apparent discrepancy between \r\nretail sales and deliveries.\nSome capital expenditures by auto firms are being postponed \r\nindefinitely, awaiting firm decisions on the standards to be adopted \r\nto curb pollution.\nResidential construction activity will rise sharply in this District \r\nin the spring season. Men and materials are available in ample \r\nquantity. Multi-family units will be especially strong. \r\nUnfortunately, the program to build modular units in the City of \r\nChicago, started in 1968, has \"flopped,\" according to a recent \r\nevaluation, with only a few units completed and no prospects for a \r\nrevival. There is a push to rehabilitate low-income housing in the \r\nlarge cities, some of which had been rehabilitated only a few years \r\nago. Business of title firms has been 10 to 30 percent higher than a \r\nyear earlier in recent months.\nThe continued heavy calendar of new corporate security issues \r\ncontinues to surprise informed individuals. Short-term rates \r\ncontinue to decline, but there is no consensus on the trend of long-\r\nterm rates. Business loan demand at commercial banks is said to be \r\n\"about seasonal.\" New commitments have increased, but lines are not \r\nbeing taken down as rapidly. Large banks are offering to make term \r\nloans more readily\u2014up to seven years in maturity\u2014but usually want \r\nto include interest rate escalators. Business firms usually prefer \r\nfixed rates, so the bargaining continues.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-03-ph

"Beige Book Report: Philadelphia\nMarch 9, 1971\nArea executives expect the mild business expansion to continue. \r\nNevertheless, the outlook is still mixed. Thus, some industries, \r\nsuch as paper, see no improvements. Retailers are not expecting \r\nstrong consumer demand this spring. Bankers are caught in a profit \r\nsqueeze and several of those we contacted saw no early pick-up in \r\nloan demand. On the other hand, there are some hopeful signs. For \r\nexample, the number of manufacturers experiencing increases in sales \r\nand new orders far outweighs those realizing decreases. But, the \r\nevidence is still not convincing that a substantial recovery is \r\nunderway.\nArea executives expect the mild business expansion, which got \r\nunderway in January, to continue. Thus, our latest business outlook \r\nsurvey shows that for February more than five times as many \r\nmanufacturers polled in the Third Federal Reserve District are \r\nregistering increases in sales and new orders as are realizing \r\ndecreases. However, the business outlook is still mixed. Thus, one \r\nof our Directors reports that prospects for the paper industry are \r\nunchanged and gloomy. Another Director, whose company makes \r\nfabricated metal products, reports his own firm is doing well \r\nbecause of orders from the power industry, but that reports from \r\nother industries with which he has contact are uniformly gloomy. \r\nNevertheless, a number of regional executives are mildly optimistic \r\nabout March. But part of their optimism reflects an expected rebound \r\nfrom the business depressing effects of the GM strike rather than a \r\nmajor shift in economic trends. Consequently, area businessmen are \r\nreluctant to hire additional employees until more solid evidence of \r\na recovery is apparent.\nDistrict retailers report that in February consumer purchasing fell \r\nback to the level of last year. One pointed out that considering \r\nthat sales were flat all last spring, this is not very comforting. \r\nDurable sales are still running behind a year ago, but not by as \r\nmuch as they were a few months ago. Some of the current weakness may \r\nbe because of the apprehension and uncertainty about the size of the \r\nPennsylvania state income tax.\nA number of retailers are concerned that not much more is in the \r\nworks for spring. Another flip to demand through special sales is \r\nless likely in the months ahead because no additional discounts are \r\nlikely to be forthcoming from manufacturers. They are watching very \r\nclosely so as not to become overstocked again.\nOn the financial side, a majority of the city banks report loan \r\ndemand is soggy. One bank, however, does report a noticeable \r\nstrengthening of loan demand, and several are optimistic about \r\ndevelopments in the spring. All of the banks are concerned with the \r\ndecline in short-term rates and the developing profit squeeze. As \r\nthey see it, they are limited in what they can do about the squeeze \r\nwhich some of them expect to get worse. Labor costs are rising, loan \r\ndemand is too weak to justify increases in lending rates, and cost \r\nof some sources of funds still is relatively high. Some of the banks \r\nsay that quality of credit continues to be a problem. None of the \r\nbanks, however, reports any progressive deterioration in credit \r\nquality is discernible now, although a number of soured loans have \r\nyet to be worked out.\nSeveral of the banks report continuing concern with the inflation \r\nproblem; some volunteered comments on their concern about the \r\npotential inflation impact of the administration's economic goals \r\nfor 1971.\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/1971/1971-03-ny

"Beige Book Report: New York\nMarch 9, 1971\nThe overall impression of the economic outlook that emerged from \r\nopinions expressed by Directors of the Federal Reserve Bank of New \r\nYork and of the Buffalo Branch and by other business leaders \r\ncontinued to be one of uncertainty, with little indication that a \r\nstrong recovery is in the offing. Sentiments were mixed regarding \r\nconsumer spending. It was generally agreed that no significant \r\npickup in plant and equipment outlays was likely over the coming \r\nmonths. A strike in the steel industry was widely expected and \r\nevidence of stockpiling was mounting. Business loan demand was \r\nreported to be holding up well in Western New York (Buffalo), but to \r\nbe relatively weak in the New York City area. As in previous months, \r\nconcern over inflation was evident with several respondents calling \r\nfor more direct government action in this area.\nWith respect to retail sales, the treasurer of a large chain of \r\ndepartment stores reported that business over the Christmas season \r\nand during the January sales had been \"reasonably good,\" but that \r\nsales in February had been sluggish and that his firm was budgeting \r\nfor only a gradual increase over the coming months. The vice \r\npresident of a large photographic equipment firm stated that his \r\ncompany saw evidence of a lack of strength in consumer spending in \r\nthe fact that retailers seemed to be living off their inventories. \r\nThe chairman of the board of a large New York City bank stated that \r\nconsumer spending has not \"blossomed\" as might have been expected, \r\nwhile the president of a large finance company felt that, on the \r\nbasis of consumer loans extended by his firm, the consumer is still \r\n\"hanging on to his dollars.\"\nOn the other hand, the executive vice president of a large New York \r\nCity department store, with branches in the suburbs, reported that \r\nbusiness had been excellent from the week before Christmas through \r\nthe third week of February (10 to 15 percent above last year), \r\nalthough it subsequently slowed; he looked for \"good solid\" business \r\nin the months ahead, but expected that \"hard work\" in the form of \r\npromotional sales and good values would be required. Similarly, the \r\npresident of a Rochester department store reported that sales\u2014notably promotional sales\u2014were better than last year. Finally, \r\nseveral other respondents felt that retail business was good, and \r\nthe president of a chain of variety stores was very optimistic with \r\nrespect to 1971 sales.\nWith respect to outlays for plant and equipment, respondents \r\nexpressing an opinion on the subject generally saw no strengthening \r\nin such outlays as compared to a month ago, i.e., 1971 outlays would \r\nprobably remain at about 1970 levels. In this context, the \r\nrespondents did not feel that liberalization of depreciation \r\nallowances would result in a significant upgrading of capital \r\nspending plans.\nSeveral bankers and other business leaders looked for an increase in \r\ninventory investment in the form of strike-hedging stockpiling of \r\nsteel. A strike in the steel industry appeared to be widely \r\nexpected, although opinions differed as to its probable length.\nOne director felt it would be short-lived, with the settlement in \r\nthe automobile industry setting the pattern for the steel \r\nsettlements. Others felt it would be longer, with this expectation \r\nshowing up in inventory policies. Thus, two directors of the Buffalo \r\nBranch, who are associated with firms using large quantities of \r\nsteel, reported their firms planned to have a 90-day supply on hand \r\nby August 1, as against normal inventories for about 30 days, while \r\nthe large photographic concern looked for a long strike and plans to \r\nbuild its steel inventories to six to eight weeks above normal \r\nlevels. In addition, several bankers reported making arrangements to \r\nfinance a substantial buildup in steel inventories. Another \r\ndirector, the president of a large manufacturing concern, felt there \r\nwould be a long strike if the economy is strong, \"but none if it \r\ngoes down.\"\nViews regarding the demand for business loans at commercial banks \r\nvaried according to locality. The Buffalo Branch banker directors \r\nreported that loan demand at their banks was holding up well. The \r\nchairman of a large New York City bank, on the other hand, saw the \r\nloan picture as weaker than a year ago. The chairman of another, \r\nsmaller, New York City bank characterized loan demand as \"sluggish\" \r\nand reported that his bank had not experienced any increase in \r\ndemand following the prime rate cuts.\nAs in previous months, deep concern was expressed over inflation. A \r\ndirector characterized the recent government action in the \r\nconstruction industry as a step in the right direction. Several \r\nother business leaders, however, felt the need for stronger direct \r\ngovernment action on the wage and price front. One business leader \r\nfelt that, with the 1972 election ahead, the President was caught \r\nbetween \"fire and drowning\" and would probably make concessions in \r\nthe fight against inflation to reduce unemployment.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1971/1971-02-ri

"Beige Book Report: Richmond\nFebruary 3, 1971\nSurveys of businessmen and bankers in the Fifth District indicate \r\ngeneral agreement on the following points:\n(1) Continuing weakness \r\nin the manufacturing sector in shipments, volume of new orders, and \r\nbacklogs of orders;\n(2) Considerable post-holiday strength in retail \r\nsales including automobiles; (3) A weak but slightly improved \r\nemployment situation; (4) Continuing evidence of price cuts in \r\nmanufacturing, but not in retail trade and services;\n(5) A gradual \r\nslight improvement in residential construction; (6) Continued very \r\nweak loan demand at District banks;\n(7) An optimistic but somewhat \r\nguarded outlook for future business conditions.\nDistrict manufacturers report on balance that shipments, new orders, \r\nand backlogs of orders continued weak during the first month of the \r\nnew year. Reports of weakness in such industries as chemicals, \r\nsynthetic fibers, electrical equipment and nonferrous metals \r\ncontinue, while some improvement is noted in containers, furniture, \r\nand hosiery.\nDistrict bankers and businessmen in trade and services report that \r\nretail sales are continuing on the high side in their respective \r\nareas, following a good holiday season for retailers. Further \r\nimprovement in automobile sales is also reported, particularly in \r\nrelation to the severe slump of the last three months that was \r\nassociated with the automobile strike.\nManufacturers' inventories are reported to have increased again in \r\nJanuary while retailers report no recent change. Retailers' \r\ninventories were brought down considerably in December.\nRespondents in manufacturing and District bankers continue to report \r\non balance that employment is down, but reports of further decline \r\nare less numerous than during the final quarter of last year. \r\nBusinessmen in trade and services report no change in employment in \r\nJanuary.\nDistrict bankers report that available labor supplies in their \r\nrespective areas remain high, and in the manufacturing sector, the \r\nlength of the workweek continues down. Some prolonged strikes in the \r\nDistrict account in part for the continuing weakness in the \r\nemployment situation. Evidence of further deterioration which was \r\npresent last fall, however, has decidedly waned.\nThe improvement in prices noted in the last two surveys by District \r\nmanufacturers is apparently continuing. Some producers in nonferrous \r\nmetals and hoisery report price cuts, and for the third consecutive \r\nmonth, reports of price increases are outnumbered by reports of \r\ndeclines. Businessmen in retail trade and services, however, report \r\nthat prices are continuing to climb. Respondents across the board \r\nreport that upward pressure on wages remains strong.\nSome improvement in residential construction during January was \r\nreported by District bankers. Recovery in the residential building \r\nfield, however, is not yet vigorous. Comments received from \r\nrespondents indicate that considerable further increases can be \r\nexpected in the months ahead, but thus far some evidence of weakness \r\nremains. Nonresidential building, which had been on the increase in \r\nthe District since last August, was reported to be lower in January.\nBusiness loan demand, which was reported down substantially in \r\nDecember, remains very weak according to District bankers. Mortgage \r\nloan demand is reported unchanged, following a sharp drop in \r\nDecember, and consumer loan demand is reported down after a December \r\nincrease. According to banking respondents, loan demand in general \r\nis weaker than at any time during the second half of 1970.\nAlthough sentiments are mixed, the general outlook of survey \r\nrespondents remains favorable. The proportion of respondents \r\nexpecting further improvement in economic conditions continues to be \r\na majority. Although the outlook is favorable, a notable lack of \r\nenthusiasm concerning future conditions is evident in the reports of \r\nrespondents. Manufacturers in the District continue to be plagued \r\nwith inventory problems and they show little inclination toward a \r\nresumption of spending for new plant and equipment. While District \r\nretailers were apparently satisfied with the sales of the recent \r\nholiday season, they also remain cautious but basically optimistic \r\nin their outlook.\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/1971/1971-02-sl

"Beige Book Report: St Louis\nFebruary 3, 1971\nThe slight increase in optimism reported last month by businessmen \r\nin the Eighth Federal Reserve District continues to prevail. Retail \r\nsales, which picked up seasonally just prior to Christmas, are still \r\nslightly ahead of this time last year. The labor picture remains \r\nunchanged in the absence of strikes. Firms interviewed report that \r\nbelt-tightening plans have been completed. Some capital spending \r\nplans are slightly higher than last year, but these tend to be the \r\nexception.\r\nHome-building continues to exceed year-earlier levels, \r\nand prospects for this activity in the future are good.\nMost respondents engaged in retail sales indicate that their \r\nbusiness is better than during the autumn months. Some automobile \r\ndealers report sharp increases in new car sales. Although overall \r\nsales improvement has not led to major changes in inventories or \r\nplant size, retailers generally feel that a moderate upswing is \r\nunderway. Prices are expected to continue up, however, reflecting \r\nhigh wage settlements and rigidities in the labor market.\nNo major improvement in the unemployment picture is anticipated in \r\nthe near future. Respondents reported no employment expansion plans, \r\nbut some indicate that the workweek may be lengthened.\nAlthough one large firm reports a capital budget that is higher this \r\nyear than last, the increase is due to long-term commitments rather \r\nthan to any additional optimism based on recent sales or other \r\nfactors. Most firms are still wary of plant expansion, and in the \r\nSt. Louis area the number of new plant inquiries is still down from \r\nthe corresponding period in the previous year.\nThe picture remains bright with respect to home-building. Building \r\npermits issued in suburban St. Louis are currently running more than \r\ndouble those of a year ago. Traffic of homeseekers has improved as \r\nmore people are actively shopping for houses. The major drawback in \r\nthe industry is the increased cost of housing due to rising input \r\nprices, especially labor costs. The directors of one branch of this \r\nBank noted that labor costs constitute 50 percent of total housing \r\ncosts. Whereas the corresponding proportion in automobile \r\nmanufacturing is only 25 percent. This factor is pricing some people \r\nout of the market despite the lower mortgage rates now available. \r\nOne respondent felt that this may be a hindrance in meeting the \r\nPresident's announced \r\ngoal of 2.6 million new housing units in 1971.\nDistrict banks had an above average increase in profits in 1970. \r\nLoan demand, however, is not increasing, while deposits are rising \r\nslowly, and rates paid on passbook and other savings-type deposits \r\nare generally unchanged. Thus the outlook for banking in 1971 is for \r\na substantial decline of the margin between the cost of funds and \r\nthe rates on bank assets. Some banks report that although net income \r\nmay be maintained at current levels, any expansion in net income \r\nwill definitely be less than the average rate of recent years.\nThe agricultural situation is characterized as \"dreary.\" Losses and \r\nlate harvesting of field crops are reported to be cutting returns in \r\nthis sector. Prices of some crops are said to be satisfactory, but \r\nthe volume of sales is disappointing. Despite the dissatisfaction, \r\nhowever, farm cash receipts remain above corresponding levels of a \r\nyear ago in most Eighth District states.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1971/1971-02-cl

"Beige Book Report: Cleveland\nFebruary 3, 1971\nThis report is based on information obtained from about 40 \r\neconomists who attended a regular meeting of the Fourth District \r\nbusiness economists round table held at the Federal Reserve Bank of \r\nCleveland on January 29, 1971. In general, these economists have a \r\nconsiderably less optimistic outlook for the economy in 1971 than \r\nthat contained in the recently released forecast of the Council of \r\nEconomic Advisers.\nThe median forecast of the group was for a GNP of $1,045 billion in \r\n1971, with a year-to-year gain of 4.2 percent in the price deflator \r\nand only 2.7 percent in real GNP. Views on the unemployment \r\nsituation were generally pessimistic. With real GNP projected to \r\nrise 4.4 percent from the fourth quarter of 1970 to the fourth \r\nquarter of 1971, and with above-average gains expected in the labor \r\nforce and productivity, most of the economists felt there would be \r\nlittle or no reduction in the unemployment rate by year end.\nOn the other hand, some members of the group expressed the view that \r\nthe decline in consumer confidence has bottomed out, and that there \r\nwas a favorable change in the climate for consumer spending toward \r\nthe end of the fourth quarter of last year. New car sales are not \r\nexpected to reach boom proportions in 1971, however, particularly \r\nafter allowance for the recoupment of strike-induced losses during \r\n1970. The median forecast of new car sales in 1971 (submitted by ten \r\neconomists associated with the automotive, steel, and rubber \r\nindustries) calls for domestic sales of 8.6 million units and \r\nimports of 1.2 million units. Auto production is expected to level \r\noff in February at roughly an 8.5 million annual rate and to \r\ncontinue at that rate through the second quarter. It was noted that \r\npart of the rebound in auto sales during the current quarter would \r\nbe reflected in the producers' durable goods component of GNP as a \r\nresult of the postponement of fleet car purchases and the shortage \r\nof GM trucks in the fourth quarter.\nThe three steel industry economists attending the meeting were not \r\nenthusiastic about the outlook for their industry. New orders for \r\nsteel are up sharply (one major company said its orders were running \r\n50 percent above the level of two or three months ago), but \r\nproduction for 1971 as a whole is expected to be virtually unchanged \r\nfrom last year. Price-hedging, in addition to strike-hedging, is now \r\nconsidered to be an important factor accentuating steel shipments \r\nduring the first seven months of this year. Among the unfavorable \r\ndevelopments reported was the expectation that the net trade deficit \r\nin steel is projected to widen from 6.6 million tons in 1970 to 13.3 \r\nmillion tons in 1971. The consensus of the steel industry economists \r\nwas that if there is a steel strike, inventories held by steel \r\nconsumers would last about two months. It would take a strike of at \r\nleast three months before other industries would be seriously \r\naffected. If there is no strike, the liquidation of excess steel \r\ninventories would probably extend into the first quarter of next \r\nyear.\nWith respect to capital goods, the business economists generally \r\nexpect current dollar expenditures to remain flat during the first \r\nhalf of 1971 and to begin a modest recovery in the second half. One \r\nfavorable straw in the wind was noted by an economist from a major \r\nmachine tool company in Cleveland. He seemed to draw some \r\nencouragement from the fact that in January his company's new orders \r\nfor metal cutting tools were about 25 percent above the extremely \r\ndepressed rate of the fourth quarter.\nEconomists from several large commercial banks who attended the \r\nmeeting mentioned that despite the recent sharp decline in short-\r\nterm interest rates and the reductions in the prime rate, many banks \r\nhad not relaxed compensating balance requirements in an attempt to \r\nincrease business loan activity. According to these economists, big \r\nbanks do not get \"political mileage\" out of reductions in \r\ncompensating balance requirements.\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/1971/1971-02-sf

"Beige Book Report: San Francisco\nFebruary 3, 1971\nBusinessmen and bankers in the Twelfth District expect little change \r\nin economic activity until later in 1971. Despite the easing of \r\nfinancial conditions through lower interest rates and the greater \r\nwillingness of banks to lend, the demand for loans has not changed \r\nsignificantly. Business investment plans are cautious, and \r\nconsumers, instead of increasing their spending, are increasing \r\ntheir saving. It is expected that activity in the housing market \r\nwill increase in 1971, stimulated in part by the greater \r\navailability and lower price of mortgages.\nRetail sales are not showing any signs of marked increase; in most \r\nareas they are proceeding at a moderate to slow pace. There had been \r\na jump in sales during the ten days before Christmas, but this \r\nincrease has not been sustained, and post-Christmas sales are \r\ndescribed as disappointing. As a result, inventories are higher than \r\ndesired and staffs are being reduced by some stores.\nAutomobile dealers in particular are finding that their sales are \r\ndisappointing since 1971 models are not selling as well as expected. \r\nOne factor, it seems, is that customers are reluctant to increase \r\ntheir indebtedness. Dealers have heavy inventories and some are \r\ncomplaining about manufacturers' pressures to build up stocks still \r\nmore. A favorable factor is that lower interest rates have reduced \r\nthe costs to dealers of carrying their inventories.\nBusiness expectations are in line with consumer behavior. In \r\ngeneral, businessmen are maintaining their current activities in \r\nline with their expectation of no immediate recovery in the economy. \r\nBusiness investment plans indicate that expenditures will be \r\nsomewhat smaller than in recent years. A survey of anticipated \r\nexpenditures for plant and equipment among Arizona companies found a \r\ndefinite shift toward caution. For 1971, only 37 percent of the \r\nfirms reported they would have higher expenditures, while 35 percent \r\nreported lower spending plant. In contrast, the figures for the 1969 \r\nand 1970 surveys averaged 60 percent for increased outlays and 16 \r\npercent for lower expenditures. The Seattle-Tacoma area continues to \r\nreport poor business prospects and one bank there describes local \r\nbusiness loan demand as being at it lowest level in 24 months. A \r\nSouthern California steel mill recently has made a sharp cut in its \r\nwork force. In Arizona, a state which is otherwise prosperous, \r\nmanufacturing employment is at its lowest level since June 1968.\nThe liberalized depreciation allowances, recently announced, are not \r\nexpected to have any immediate impact on business spending. Most \r\nbusinessmen report that the change is too small to affect their \r\ndecisions or that their investment plans are based on longer-run \r\nforecasts of the demand for their products.\nThere are some favorable trends in manufacturing. A large oil \r\ncompany reports that it is maintaining its planned investment in \r\n1971 at the same $800-million record set in 1970. A major \r\nelectronics firm in Oregon, which had previously announced a layoff \r\nof 1,000 employees, has reversed itself and, instead of a layoff, \r\nwill only require each employee to take a 10-day, unpaid vacation \r\nbefore May 1. In the face of an expected increase in housing demand, \r\nbuilding materials firms are expanding production and beginning to \r\nundertake new investment in plant. Timber mills are starting to \r\nincrease output and rebuild inventories of certain product lines. \r\nSome mills which had been closed are being reopened.\nChanges in housing demand are in line with these expectations. In \r\nSouthern California, sales of houses are rising according to reports \r\nof local real estate firms. In Idaho and Utah, construction activity \r\ncontinues to expand. Overall, most of the strength has been in \r\nresidential rather than nonresidential building.\nAgriculture in the District has mixed trends. Fruit prices have held \r\nup well. Other crops have had large yields, but their prices are \r\nlikely to fall as a result. There are also large stocks of poultry \r\nand beef on hand which make any substantial increase in livestock \r\nprices less likely.\nBanks are intensifying their efforts to obtain good business loans, \r\nbut no major increase is reported. Consumers seem to be willing to \r\nincrease their installment debt and the counterpart of this is an \r\nincrease in savings deposits. Banks have cut their interest rates on \r\nvarious classes of loans in line with market trends. Several major \r\nbanks have stopped accepting 5 3/4 and 5 1/2 percent consumer-type \r\nsavings certificates. The maximum is now 5 percent and reductions \r\nare becoming general. There are complaints of a profit squeeze by \r\nsome bankers and they hope that Regulation Q ceilings will be \r\nlowered to facilitate the movement to lower rates on all savings \r\naccounts.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1971/1971-02-bo

"Beige Book Report: Boston\nFebruary 3, 1971\nFirst District business conditions show no material change from last \r\nmonth, with the hoped-for stimulus from auto sales and other retail \r\nareas failing to materialize. The commercial banking sector \r\ncontinues to log excellent deposit flows, as do thrift institutions \r\nin most areas. Residential mortgage rates have fallen further, in \r\nsome cases by large amounts. Our academic respondents seem a bit \r\nless pessimistic than in December.\nReports of strong consumer response to January sales constitute the \r\none bright spot on the retail scene. This is entirely consistent \r\nwith the pronounced consumer cost consciousness which has been \r\nreported since last fall. Auto dealers have felt the same \r\nphenomenon, with very high proportions of their sales activity \r\nconcentrated in the compact and subcompact classes. Intermediate and \r\nluxury class auto sales have run well below expectations following \r\nthe conclusion of the GM strike, and dealers seem split as to \r\nwhether they are up against a generally poor year or merely feeling \r\nunusual seasonal effects.\nTo date, improving mortgage conditions seem to have provided impetus \r\nmainly to sales of existing homes. Further mortgage rate cuts seem \r\nlikely, however, and mortgage lenders generally expect a strong \r\nsurge in new home activity with the spring. Declining mortgage \r\nyields have already led several area thrift institutions to drop \r\ntheir 6 percent savings certificates, and more are expected to \r\nfollow.\nWhile noting his general satisfaction with the proposed Federal \r\nbudget for fiscal year 1972, Professor Wallich expressed concern \r\nover the Administration's $1,065 billion GNP estimated for 1971. He \r\nsuggested that it cannot be taken seriously and that, lest it be \r\nallowed to influence current policy, its origins within the CEA \r\nshould be explored.\nProfessor Eckstein now reports an upward revision in the DRI \r\nforecast for 1971 to $1,047 billion. The adjustment was made largely \r\non the basis of recent improvements in housing starts and retail \r\nsales, as well as continuing monetary ease and declining interest \r\nrate levels. The unemployment path commensurate with the $1,047 \r\nbillion projection shows 5.9 percent for year-end 1971 and 5.4 \r\npercent at the close of 1972. Eckstein made a strong plea for \r\ncontinuing the current monetary stance, resisting any tendency to \r\nreduce the stimulus in response to recent signs of recovery and \r\ncontinuing signs of rapid inflation.\nProfessor Tobin expressed the view that the burden of achieving \r\neconomic expansion over the next 18 months should properly fall on \r\nmonetary, not fiscal policy. Accordingly, he feels that the System \r\nhas for some time been overly cautious in its targets for credit \r\nmarket conditions and the aggregates. Tobin, Wallich and Eckstein \r\nall are expecting a reversal in the declining rate levels by mid-year as business credit demands turn round. Professor Samuelson was \r\nunavailable for comment this month.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1971/1971-02-ph

"Beige Book Report: Philadelphia\nFebruary 3, 1971\nBusiness activity is accelerating in the Third District. Although \r\nexpectations about future expansion in the economy are in a state of \r\nfragile optimism, retailers report that January was a good month, \r\nand they are hopeful about February. Manufacturers report improved \r\nbusiness in January as well, and they too are cautiously optimistic \r\nabout the coming months. Industrialists believe that more liberal \r\ndepreciation allowances will give plant and equipment spending a \r\nboost. But, for the near term at least, business will hold the line \r\non hiring. Loan demand at banks continues weak; also bankers remain \r\nconcerned about the quality of loans in their portfolios.\nPhiladelphia department stores report that the good Christmas \r\nperformance continued through January. Sales remain above last year \r\neven after adjusting for price increases. Demand is mixed across \r\nmerchandising lines, however, \"where customers see good values, \r\nthey're buying,\" as one retailer put it. Sales clearance items such \r\nas women's coats, pant suits, and men's shirts, suits, and \r\naccessories are moving well; whereas furniture and other big ticket \r\nitems remain weak. The test of consumer strength will come in \r\nFebruary, one large retailer says. His reasoning is that post-holiday sales will be over and the new spring merchandise will be on \r\ndisplay. If the newly stocked goods sell well, there is room for \r\noptimism. In the meantime, area retailers are keeping a sharp eye on \r\ninventories and holding new orders to a minimum.\nManufacturing activity in the Third District is still distorted by \r\nthe aftermath of the General Motors strike. New orders and sales \r\nwere up substantially in January. Looking beyond the strike make-up \r\nperiod, however, area manufacturers are cautiously optimistic that a \r\nmild upward turn in the economy is in prospect.\nAll of the directors with industrial connections agree that the \r\nrecent changes in depreciation allowances will stimulate business \r\ninvestment, particularly for new equipment. One director with wide \r\ncontacts in the industrial world says there is confusion about when \r\nthe new depreciation rule will go into effect. The upcoming Treasury \r\nhearing of the new changes is causing some uncertainty, he says. But \r\nonce the confusion is gone and the rule change becomes firm, he \r\nbelieves that investment outlays will be stimulated beginning about \r\nsix months later.\nAlthough the area business community is mildly optimistic about an \r\neconomic pickup, they plan to hold the line on the number of \r\nemployees at least for the near term. By mid-year, however, about \r\none-third of the manufacturers we contacted indicated that some \r\nhiring may be taking place.\nSeveral directors used the word \"sober\" to describe the general mood \r\nof people in their respective area. Rising unemployment and prices \r\nare making consumers cautious, say these directors. One director \r\nsays that unless this sober psychology is altered, he does not \r\nbelieve that the pickup in the economy will be substantial.\nAt banks, loan demand remains flat. Also there continues to be a big \r\nconcern about the quality of loans. Bankers report that they are \r\ngoing out of the savings certificate business. One country banker, \r\nfor example, says that his bank no longer issues 5 1/2 or 5 3/4 \r\npercent certificates. He says he has not faced the renewal problem \r\nyet because these certificates have not started maturing. He is not \r\nsure yet how he will handle renewals when they arise.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1971/1971-02-da

"Beige Book Report: Dallas\nFebruary 3, 1971\nContinued inflation appears to be the major concern of the directors \r\nof this bank. Of the ten head office and branch directors surveyed \r\n(none of whom is a commercial banker), most expect a growing economy \r\nin 1971, characterized by a resurgence in consumer spending, a \r\nfurther downward movement of interest rates, and continued wage and \r\nprice increases. With respect to the economy of each respondent \r\ndirector's local area, prospects were viewed as being only fair. \r\nSome major public construction projects are planned for 1971, and it \r\nis expected that these capital outlays will require tax increases in \r\nsome localities. Retail sales are anticipated to remain sluggish, \r\nand few of the respondents are planning any increase in capital \r\nexpenditures. Job opportunities are expected to rise only slightly \r\nas the year progresses. All foresee higher labor costs, but few \r\nexpect to make changes in present levels of employment.\nWith respect to the national economy, a fairly optimistic outlook \r\napparently holds. Most directors expect renewed economic growth, \r\nlargely as a result of a rise in consumer spending and an increase \r\nin the Federal budget deficit. All but one of the respondents feel \r\nthat interest rates will move down further through 1971. In \r\naddition, the gap between short-term and long-term rates is \r\nanticipated to narrow somewhat as long-term rates decline relative \r\nto short-term rates. However, most expect that inflation will \r\ncontinue to be a problem during the remainder of the year-in fact, \r\nmuch more so than unemployment. And, while some feel it would be \r\nwise to institute wage and price controls, none believes that this \r\naction will be taken.\nThe economic outlook for most local areas is somewhat less \r\noptimistic, the directors report. A few do expect growth in their \r\ncities' budgets, as some major public construction projects are \r\nplanned. However, it was mentioned that increased taxes-particularly \r\nproperty taxes-are likely to accompany these additional governmental \r\nexpenditures. Local consumer spending is not expected to provide \r\nmuch strength this year, with retail sales anticipated to be about \r\nthe same as in 1970. Moreover, job opportunities may improve only \r\nslightly. All are expecting rising labor costs in 1971, with some \r\nanticipating an increase of more than 10 percent. And while few \r\nthink they will have to release additional employees, none mentioned \r\na need to add to employment in 1971.\nRespondents indicated that capital expenditures are also likely to \r\nremain about unchanged from last year. In fact, only a few reported \r\nincreases in capital expenditures last year even though dollar sales \r\nvolume rose fairly substantially. Most of the increase in dollar \r\nsales was the result of inflation, as physical-unit sales either \r\nrose only slightly or declined. Moreover, few anticipated any major \r\nchange in product composition. Thus, in most cases, present plant \r\ncapacity is quite adequate. However, some indicated that they may \r\nface future changes in capital equipment in relation to new anti-\r\npollution regulations.\nOn the whole, the district economy continues to remain fairly strong \r\nin comparison with the rest of the nation. Retail sales were up \r\nslightly in December, but consumer spending still remains subdued. \r\nIndustrial production continues strong, reflecting mainly the high \r\nlevel of oil-activity in the District. Although oil allowables for \r\nFebruary are down slightly, the longer-run outlook for production is \r\nbright as transportation problems caused by the shortage of world \r\noil tankers continue to place demand on domestic sources. \r\nUnemployment in Texas rose substantially in December, but it is \r\nstill significantly below the national average. In the agricultural \r\nsector of the District economy, there is some concern about the \r\nrecent dry weather, which has forced supplemental feeding of \r\nlivestock in some areas.\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/1971/1971-02-ny

"Beige Book Report: New York\nFebruary 3, 1971\nOpinions expressed by the directors of the New York Bank and of the \r\nBuffalo Branch and other business leaders point to a significantly \r\nmore buoyant retail sales picture and, on balance, a continued \r\nfavorable outlook for residential construction. At the same time, \r\nmost respondents looked for little or no immediate improvement in \r\nthe unemployment situation nor for any easing of wage and price \r\npressures.\nSentiments expressed by most respondents regarding consumer spending \r\nwere noticeably more optimistic than a month ago. The consensus was \r\nthat the spurt in sales in the pre-Christmas week, and the continued \r\nfavorable retail sales picture in January, might well signal the \r\nlong-awaited improvement in consumers' attitudes. A typical opinion \r\nwas expressed by the chairman of the board of a large New York City \r\nbank, with close contacts with several large retail firms, who saw a \r\ndecidedly optimistic turn in outlook just before Christmas and into \r\nJanuary. However, several directors of the Buffalo Branch were less \r\noptimistic regarding automobile sales, reporting that most auto \r\ndealers in their area were experiencing less business than had been \r\nanticipated with the settlement of the General Motors strike. One of \r\nthe Buffalo directors felt that the high rate of savings in the \r\nrecent past, together with declining consumer debt could well set \r\nthe stage for a sharp rise in auto sales within the next few months.\nMost respondents were generally optimistic about the outlook for \r\nresidential housing construction. Several of the directors referred \r\nto the increased availability of mortgage funds available at lower \r\nrates at banks, insurance companies and other financial \r\ninstitutions. Several of the directors at both the New York Bank and \r\nthe Buffalo Branch, however, noted that the high cost of land and \r\nother construction costs could inhibit increased residential \r\nconstruction.\nWhile mixed, opinions regarding the unemployment picture on balance \r\nwere relatively pessimistic. The chairman of the board of a large \r\nmanufacturing concern felt unemployment would rise further, while \r\nsimilar feelings were expressed by an upstate banker and the \r\npresident of another large manufacturing concern. The Rochester \r\nbusinessman reported that unemployment in that city was rising, and \r\nthat the largest firm in the area was making its employees take one \r\nday off without pay a month and was considering ordering additional \r\ntime off. An upstate banker, on the other hand, expected some \r\nimprovement in the spring. Another director reported a trend toward \r\nless severe layoffs in airlines, electronics, computer-related \r\nindustries, and light manufacturing, with many job cutbacks \r\naccomplished through attrition rather than actual layoffs.\nThe directors of the Buffalo Branch generally felt that unemployment \r\nhad peaked, but they did not look for any dramatic improvement over \r\nthe next few months.\nThe directors and other business leaders continued to show concern \r\nover the wage and price situation. None of the respondents saw \r\nevidence of an easing of wage pressures. The chairman of the board \r\nof a large New York state utility corporation expressed the feeling \r\nthat until union leaders can be convinced inflation will actually \r\nslow, it will be difficult to get them to reduce their demands. The \r\nreal purchasing power of workers has barely held even over the last \r\n2 1/2 years, he noted, placing sustained pressure on union leaders \r\nto seek higher wage settlements. Most of the respondents saw no \r\nsigns of price shading. The chairman of the board of the large \r\nmanufacturing concern did report that while he knew of no \r\nappreciable price reductions in the industries with which he was \r\nfamiliar, he heard talk about such cuts elsewhere. Another leading \r\nbusinessman, a director, thought that the only area where price \r\npressures might ease was raw materials.\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/1971/1971-02-kc

"Beige Book Report: Kansas City\nFebruary 3, 1971\nThere are indications that the economy of the Tenth District may be \r\nshowing renewed strength. A growing optimism is present in some \r\nparts of the District, beyond what may be inferred from current \r\nbusiness statistics. Reports from Head Office and Branch Directors \r\nsupport the evidence from the statistical indicators that \r\nconstruction activity and outlook is a relatively bright spot in the \r\neconomy of the Tenth District. Both residential and nonresidential \r\nbuilding are responding favorably to factors such as increasing \r\navailability of funds, improving economic conditions, and the \r\nresumption of activity following the end of the construction \r\nworkers' strike in Kansas City.\r\n\r\nThe slowdown in the growth of personal income seems to have been \r\nreversed in the District as a whole, and the District unemployment \r\nrate has apparently stabilized. Of course, there are variations \r\nwithin the District and among different industries. For example, \r\nfurther layoffs have been announced for several defense-oriented \r\nestablishments. In contrast, business conditions generally seem \r\nstronger in Colorado, New Mexico, and Oklahoma than in the remaining \r\nDistrict states. Abnormally severe winter weather also has reduced \r\nthe pace of economic activity in the northern section of the \r\nDistrict. On the whole, retail activity during the Christmas season \r\nwas reported to have been reasonably good-in many cases, better than \r\nearlier expected.\r\n\r\nStrength in the value of construction contract awards is found in \r\nboth the residential and nonresidential parts of the industry. \r\nAgain, the northern section of the District appears to be somewhat \r\nlaggard as far as construction is concerned. Some Branch Directors \r\nfrom Wyoming and Nebraska report that Section 235 and 236 housing is \r\nabout the only kind of residential building going on in their areas. \r\nIn the Omaha area, there is very little in the way of new commercial \r\nand industrial projects, only spotty interest in apartment building, \r\nand not much custom building of new single-family dwellings.\r\n\r\nElsewhere, construction activity is relatively strong-especially in \r\nOklahoma, New Mexico, and Colorado. An upsurge in home building is \r\nreported for both Tulsa and Oklahoma City, and both also are \r\nexperiencing a good deal of commercial construction activity. \r\nAlbuquerque, too, is having an increase in both multiple-unit and \r\nsingle-family building, and considerable optimism is reported in \r\nbusiness circles there-with regard to the general business outlook \r\nas well as in housing. Commercial and residential building (both \r\nsingle-family and multiple-unit structures) growth is vigorous in \r\nColorado, both in Denver and in other urban centers as well. There \r\n(as elsewhere in these states), strength in housing is reported \r\nacross the spectrum from smaller, less expensive single-family homes \r\n(some due to Section 235 and 236 subsidies) through higher-priced \r\nsingle-family dwellings to high-rise, high-price apartment \r\nbuildings.\r\n\r\nThe general retrenchment of livestock prices during the last half of \r\n1970-due primarily to the new sharp increase in hog marketings-had a \r\npronounced impact on District farm income. Last year, cash receipts \r\nfrom District farm marketings-73 percent from livestock sales-\r\nincreased 2.4 percent above 1969 levels, as compared with a 3 \r\npercent rise for the nation. However, third and fourth quarter \r\nreceipts in the District were, respectively, 2.6 and 4.1 percent \r\nlower than in the comparable periods for 1969, with both crops and \r\nlivestock contributing to the decline.\r\n\r\nThere are indications that the District livestock picture may show \r\nimprovement in 1971. Recent reports point to a likely abatement of \r\nthe increase in sow farrowings, compared with the levels of a year \r\nago. Likewise, the number of cattle on feed in the District, as of \r\nJanuary 1, was 3.9 million head-down 1 percent from 1970. For the \r\nnation, the decline was 3 percent. Marketings in the District during \r\nthe October-December quarter were 11 percent higher than in the \r\nyear-earlier period, while placements were down 4 percent. Hence, \r\nthe production adjustments currently underway in the hog industry, \r\ntogether with a likely reduction in fed cattle marketings, point to \r\nhigher livestock prices in the months ahead.\r\n\r\nAfter declining farm prices from March to December 1970 helped to \r\nintroduce some stability into the overall wholesale price index, the \r\nJanuary 1971 increase in the WPI was spurred mostly by rises in the \r\nfarm products and processed feeds components of the index. In view \r\nof the prospects for higher livestock prices, it is unlikely that \r\ndeclining farm prices will exert a stabilizing influence on the \r\noverall WPI in 1971.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"