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St Louis

/beige-book-reports/1970/1970-06-sl

"Beige Book Report: St Louis\nJune 17, 1970\nBased on discussions with our Branch and Main Office Boards of \r\nDirectors, officials of larger business firms, financial editors, \r\nand others, we conclude that business in the Eighth Federal Reserve \r\nDistrict is generally good and is expected to remain so. The \r\nconsensus for the second half of the year appears to be one of \r\nconsiderable optimism. It is generally believed that the period of \r\nslackening business will be over soon after midyear and that the \r\neconomy will resume its uptrend of recent years. Price increases are \r\nexpected to continue little abated and consumer spending is expected \r\nto continue strong. Any change in the rate of capital spending is \r\nlikely to be on the plus side, though demand for labor appears to be \r\nslackening somewhat. Business inventories are at moderate levels. \r\nPessimism continues to prevail with respect to business profits, as \r\nwage settlements appear to be in excess of amounts that can be \r\npassed on in higher prices for product. Demand for credit continues \r\nto grow at a high rate.\nApart from the fact that food and apparel prices are expected to \r\nhold relatively stable, most businessmen in the Eighth District \r\nexpect inflation to continue at about the current rate throughout \r\nthe second half of this year. Major forces contributing to these \r\nexpectations include strong consumer demand, a high rate of capital \r\nspending by business firms, and the large wage increases received by \r\nworkers in recent labor negotiations.\nConsumer demand, although slowed somewhat in recent months, is \r\nexpected to be generally strong in the second half of the year. \r\nConsiderable optimism is expressed relative to overall consumer \r\nexpenditures. Most of the recent slowdown is credited to strikes and \r\nfactors other than a general decline in total demand. As a minority \r\nview, one department store reported that sales expectations for the \r\nremainder of the year have been reduced somewhat and that consumer \r\npurchases were becoming more selective. Customers were reported to \r\nbe responding more to good values and as being somewhat less quality \r\nconscious that previously.\nThe rate of growth in demand for labor has apparently declined \r\nslightly. There have been a few layoffs, and in several cases \r\nworkweeks have been shortened and over time eliminated. Job offers \r\nto June college graduates are down sharply, according to college \r\nplacement officials. The salaries offered continue to creep up from \r\n1969 levels, however, indicating continued growth in demand for \r\ntrained personnel. Little change in overall employment was \r\nanticipated by the business community for the second half of the \r\nyear.\nBusiness investment continues up as budgeted, and no cutbacks are \r\nanticipated in the second half of the year. Manufacturing officials \r\nheld uniformly to this optimistic view. If any change is apparent in \r\nrecent weeks concerning business investment, it is that capital \r\ngoods spending is gaining in strength. More modernization and \r\nimprovement programs are being undertaken in an attempt to maintain \r\nprofit margins in the face of sharply increased labor costs. Only \r\none establishment, a discount-type retail facility, indicated a \r\nslight slowdown in investment.\nInventories of Eighth District firms are generally at satisfactory \r\nlevels. No firm surveyed reported any excesses to be worked off as a \r\nresult of the recent slowdown. One apparel manufacturer reported a \r\nlower inventory-to-sales ratio than heretofore because of \r\nefficiencies from improved inventory accounting methods. A major \r\ndepartment store reported that inventories can be quickly reduced at \r\nwill through planned sales.\nProfits are the one item about which the respondents were uniformly \r\npessimistic. High wage settlements are the important problem that is \r\ndisturbing all the officials, and little relief is in view. Some \r\nfurther decline in profits is anticipated in the second quarter of \r\nthis year, and little increase from these depressed profit levels is \r\nanticipated in the second half of the year.\nDemand for bank credit continues brisk. Both consumer and business \r\nloan demands continue strong. Usury laws, however, tend to intensify \r\ncredit problems in much of the district as market rates are higher \r\nthan permissible lending rates to noncorporate borrowers in some \r\nstates.\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/1970/1970-06-kc

"Beige Book Report: Kansas City\nJune 17, 1970\nThe general pace of activity in the District is moving along on a \r\nplateau. Local activity is stronger where the economy has been \r\nexperiencing a strong growth situation. The agricultural picture \r\nalso continues to be favorable. At the same time, construction \r\nslowdowns, reduced defense activity, and labor strikes have slowed \r\nthe economies of some areas. The residential construction industry \r\ncontinues to be plagued with a lack of mortgage financing. The \r\nconstruction industry also exemplifies the deeply imbedded impact of \r\ninflation, as may be noted by some current wage demands in the \r\nindustry.\nDistrict retail sales, as indicated by selected larger merchants, \r\nare fair and in a few geographical areas good. Retailing for May and \r\nearly June is running somewhat ahead of the same period a year ago; \r\nhowever, the dollar gain is not as large as the increase in prices, \r\nso that real volume is down somewhat. The only merchandise that is \r\nselling at lower prices is ladies' ready-to-wear, which reflects the \r\nneed to move heavy inventories of styles being obsoleted.\nThere is some evidence that the average unit of sale has increased \r\nin size: there are fewer customers, and they are making larger total \r\npurchases. No evidence was uncovered among major department stores \r\nindicating that customers were downgrading quality in their \r\npurchases. Rather it seems that customers with higher and more \r\nstable income prospects have become relatively more important and \r\nare maintaining quality levels. Persons with reduced income \r\nprospects are limiting purchases to necessities.\nAdvance reservations at important winter recreation areas are \r\nreported to be slow, indicating that consumers are hesitant to make \r\nthese longer-term commitments. This contrasts with a strong upward \r\ntrend in this consumer activity during recent years. Special \r\neconomic circumstances are having important effects on sales in some \r\nareas. For example, while retail volume in Kansas City has held up \r\nquite well to this point, merchants are increasingly noting the \r\neffect of the construction strike which is now 2 1/2 months old.\nThe construction industry situation in Kansas City is serious, and \r\nit may have implications well beyond the immediate area. Kansas City \r\nlast year lost more man-days from strikes than any other area of the \r\ncountry. This year the laborers, whose current wage rate is $4.01 \r\nper hour, are asking for an increase of $4.00 per hour now and a \r\ntotal increase of $6.00 over three years.\nConstruction activity reflects a variety of local situations in the \r\ncontext of national financial markets and Federal programs. Highway \r\nconstruction generally is active throughout the District. Commercial \r\nconstruction is strong in some areas where it reflects urban renewal \r\nprojects as well as other building, particularly office buildings. \r\nCurrent and anticipated construction of new factories and plants is \r\nweak throughout the District. Despite strong demand for housing in \r\nmany areas, new construction of dwellings is slow throughout the \r\nDistrict because of difficulty in obtaining financing.\nThe agricultural sector continues to add strength to District \r\neconomic activity. Cash receipts from farm marketings during the \r\nfirst quarter of this year averaged a fifth higher, compared with \r\nthe favorable levels of the comparable period of last year. Although \r\nthis rate of increase is not likely to be maintained, all \r\nindications point toward a substantial improvement over last year's \r\nrecord-high levels of farm receipts. In addition to receipts from \r\nthe sale of a good wheat crop which is now being harvested, income \r\nfrom livestock sales remains more favorable than was expected. It \r\nalso should be pointed out that payments under the various \r\nGovernment farm programs will be made differently this year, \r\ncompared with other recent years. Payments on wheat certificates, \r\nfeed grain programs, and the cotton\nprogram\u2014which are likely to \r\napproach three quarters of a billion dollars\u2014will be made largely \r\nduring the next two months. These payments, amounting to about 10 \r\npercent of total cash receipts from farm marketings in the District, \r\nwill add substantially to the volume of funds in District banks. \r\nThese favorable income prospects for agriculture have been \r\nresponsible for relatively high levels of economic activity in rural \r\nareas, even though many marginal farmers are discontinuing \r\noperations.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1970/1970-06-mi

"Beige Book Report: Minneapolis\nJune 17, 1970\nBusiness and labor leaders in the Ninth Federal Reserve District are \r\nvery concerned about the persistence of inflationary pressures and \r\nseem to be willing to try almost anything, including wage-price \r\nguidelines, to control the problem. District investment firms are \r\nencountering financial difficulties and, as a result, have had to \r\nalter their operations. Businesses are continuing to cut back their \r\ninvestment plans, and scattered instances suggest that consumers may \r\nbe changing their consumption patterns because of the uncertainty \r\nregarding the state of the economy.\nDuring the go-around at the last meeting of the Board of Directors \r\nof the Federal Reserve Bank of Minneapolis, the directors were asked \r\nwhether or not business and union leaders in their local areas would \r\nsupport some kind of incomes policy or wage-price guidelines. They \r\nfelt that people are becoming increasingly concerned about inflation \r\nand are becoming progressively disenchanted with traditional \r\nrestrictive monetary and fiscal policies. As a result, the directors \r\nfelt that guidelines would probably be publicly unpopular but in \r\nmany cases would be privately welcomed. In general, they thought \r\nthat people would prefer to see voluntary controls imposed rather \r\nthan new legislation, and that businessmen are more in favor of \r\nguidelines than labor leaders. The directors cited a number of\r\ninstances where business leaders have voiced approval of some kind \r\nof guidelines. The directors also cited cases where labor leaders \r\ndid not want to be quoted but were concerned with the large \r\nsettlements which have been won by unions in recent labor disputes. \r\nBecause of these large settlements, rank and file members are \r\nexpecting large wage increases and union leaders are afraid to ask \r\nfor less. Guidelines would give them an excuse to argue for lower \r\nwage settlements.\nThe financial difficulties being experienced by Wall Street \r\ninvestment bankers, mutual funds, and securities dealers are \r\napparently also being encountered by Ninth District investment \r\nfirms. A telephone poll of two leading local investment banking \r\nfirms explored the implications of these problems in three areas of \r\ntheir operations. First, operating staffs of securities brokers have \r\nbeen cut back about 15 to 20 percent in the last year. These \r\ncutbacks, however, were attributed to the decline in volume of \r\ntrading rather than to the current financial crisis. In general, \r\nsales staffs have been reduced, with the declines occurring in some \r\ninstances through attrition rather than through layoffs. Second, a \r\nsecurities brokerage house is closing one of its suburban offices \r\nbecause of the lack of volume. In addition, a director was aware of \r\na mutual fund in Billings, Montana, which has recently closed down. \r\nThird, merger activity among securities brokers appears to be on the \r\nupswing. Both investment bankers who were contacted reported that \r\nthey had been approached by a number of smaller firms in the last \r\nthree months. Although only two mergers have been consummated, these \r\nfirms felt that additional mergers could take place in the not-too-distant future.\nScattered pieces of information continue to show that District \r\nmanufacturers are cutting back their capital expenditure plans. Two \r\ndirectors cited cases where distributors of heavy equipment to \r\nagriculture and construction firms have experienced sharp declines \r\nin sales during the past month or so. It was also reported that a \r\nlarge retail firm headquartered in the twin cities has cut back its \r\ncapital appropriations by about 50 percent. One other director \r\nstated that General Motors has scheduled huge cutbacks in capital \r\nspending, with each division being asked to curtail capital \r\nexpenditures.\nA number of examples have come to light which suggest that consumers \r\nare changing their consumption patterns. A Minneapolis-based \r\nundergarment manufacturer reports that its sales are 10 to 15 \r\npercent below last year's levels. They attribute their poor sales \r\nperformance this year to the slowdown in department store sales and \r\nfeel that consumers are taking their business to lower priced \r\nstores. Automobile dealers in the twin cities report a downturn in \r\nauto sales which has been centered primarily in higher priced \r\nautomobiles and that sales of basic models are holding up fairly \r\nwell. In addition, repair shops for both automobiles and other \r\ndurable goods are experiencing sharp increases in business, which \r\nsuggest that consumers are tending to hold off on major durables \r\npurchases. A telephone pol1 of resorts around the District reveals \r\nthat resort owners are experiencing a number of cancellations, \r\nalthough accommodations at Yellowstone and Glacier National Parks \r\nare still very tight. All the resort owners who were contacted said \r\nthat they could accept reservations for any time this summer.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1970/1970-06-ri

"Beige Book Report: Richmond\nJune 17, 1970\nInformation obtained in the Fifth District, primarily through \r\nsurveys of businessmen and bankers, indicates substantial agreement \r\non the following points: (1) a weaker employment situation with some \r\nfurther increases in unemployment, (2) continued upward wage \r\npressure, with a few price declines in manufacturing, (3) further \r\nweakness in retail trade and automobile sales, and weakened consumer \r\nloan demand, (4) continued severe slump in construction, but some \r\nincrease in the demand for mortgage loans, (5) no diminution in \r\ndemand for additional capital facilities, (6) continued weakness in \r\nnew orders, order backlogs, and shipments in manufacturing, and (7) \r\nexcessive levels of business inventories.\nManufacturers in the District continue to experience declines in \r\nshipments, volume of new orders, and backlogs of orders. Both \r\ndurables and nondurables manufacturing lines are affected by the \r\ncurrent slump which has been in evidence since the beginning of the \r\nyear. This situation is reported in such important District \r\nindustries as textiles, chemicals, nonferrous metals, and furniture.\nWeakness continues in the retail trade sector, including automobile \r\nsales. Some survey respondents report that, while dollar volumes of \r\nretail sales are not necessarily declining in all cases, physical \r\nvolumes definitely are. The consensus in the District is that \r\nconsumers are also sacrificing quality, and are reacting to \r\ninflation by purchasing goods of lower quality with cheaper price \r\ntags.\nInventories in manufacturing reportedly have declined only slightly \r\nduring the preceding month, and no significant change is reported in \r\nretail inventories. Current levels of inventories in both areas, \r\nhowever, are reported to be higher than desired.\nThe employment picture in the District is reported to be \r\nconsiderably weaker overall. Survey respondents in manufacturing \r\nalso report a further decline in hours worked per week. The trade \r\nand services area seems somewhat stronger with regard to employment \r\nthan does manufacturing.\nOn the unemployment question, persons in trades and services say \r\nthat ample supplies of both skilled and unskilled labor are now \r\navailable, in contrast to reports of previous months. Respondents in \r\nmanufacturing, however, where the employment situation is apparently \r\nweaker, report local supplies of skilled and unskilled labor still \r\nto be inadequate. Many respondents, though, report the quality of \r\navailable labor to be seriously deficient in both skilled and \r\nunskilled groups.\nWages in the District are reported up sharply across the board, \r\nparticularly in the trades and services. Prices have reportedly \r\ndeclined somewhat in the manufacturing sector, while continuing to \r\nrise in other areas. Price reductions are reported by several large \r\ntextile manufacturers as well as by some furniture producers.\nResidential construction reportedly declined further in the \r\npreceding month and remains severely depressed. Nonresidential \r\nconstruction also is reported down, a reversal of the report \r\nreceived in May.\nDemand for consumer loans apparently weakened somewhat during the \r\npreceding month. Some respondents link this to reduced work weeks \r\nand general uncertainty about the future course of incomes, \r\nparticularly among manufacturing employees. Further increases are \r\nreported in demands for business loans and mortgage loans.\nOpinions expressed in the Fifth District continue to emphasize the \r\nnumerous noneconomic factors presently contributing to uncertainty, \r\nboth at home and abroad. Economic decisions in the District \r\napparently are being influenced by these factors.\nA more detailed survey of capital spending plans in the District \r\nlast month indicated continued strength in plant and equipment \r\nspending. The most recent survey indicates no significant change in \r\nplans. Manufacturers generally report capacity to be somewhat in \r\nexcess, but the proportion of them desiring to increase investment \r\nspending continues to outweigh the proportion that does not plan to \r\ndo so. In the trade and service fields, the reported consensus is \r\nthat facilities are inadequate, and there is evidence of increases \r\nin investment plans. Fear of continued inflation is apparently an \r\nimportant factor.\nRespondents report inventory levels to be excessive across the \r\nBoard. More concern is expressed by manufacturers than by retailers, \r\nand the reports cover a broad spectrum of District industry\u2014textiles, furniture, metals, and building materials producers.\nDistrict bankers express the view that further economic decline is \r\nprobable before a general recovery occurs, although a smaller \r\nproportion of respondents hold this view than in previous 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/1970/1970-06-cl

"Beige Book Report: Cleveland\nJune 17, 1970\nEconomic conditions in this District appear to have stabilized at a \r\ndepressed level. There is little evidence that a general upturn is \r\nin progress, although most of the strike-related distortion seems to \r\nhave been eliminated. In retail stores consumers appear to have \r\nbecome more price conscious,\r\nbut softness of demand is selective \r\nrather than general. \r\nThe mood of our directors has recently shifted \r\nfrom cautious optimism to deep pessimism. They now believe that the \r\ncurrent economic contraction will be more prolonged and deeper than \r\nmost economists and public policy makers are currently expecting.\nRecent terminations of strikes in the trucking and rubber industries \r\nresulted in a peaking in mid-May in the sharp rise in the District's \r\ninsured unemployment rate. The rate has subsequently declined \r\nmoderately although it remains roughly three times as large as the \r\nlow point of last autumn. Our regular monthly survey of District \r\nmanufacturers conducted during the first two weeks of June revealed \r\nfurther distortions caused by strikes and lockouts. Some of the \r\nmajor \r\nmetal-producing and metal-working firms expect to be shipping \r\nin June partly from inventories that they were unable to ship in \r\nMay. The survey accordingly showed an anticipated rebound in \r\nshipments and in employment during June, coupled with a sharp \r\ndecline in inventories. Other anticipatory data for the current\r\nmonth do not suggest an immediate general recovery in the District's \r\nmanufacturing sector.\nDiscussion with an economist from a major department store chain \r\ndoing nationwide business revealed that consumers have sharply \r\ncurtailed their purchases of high-price luxury items and certain \r\nappliances. On the other hand, bargain basement business is \r\nextremely good for many items such as ready-made apparel. \r\nConfirmation of the fact that sales of big-ticket items \r\n(refrigerators, televisions, and other durable goods) have suffered \r\ncame from one of our directors who is on the board of a major \r\ndepartment store in Cleveland. Most of our directors, especially \r\nthose associated with large industrial firms and banks, are now \r\nextremely pessimistic. They believe that real economic activity will \r\nshow little, if any, recovery in the second half of 1970, and they \r\nare deeply concerned by their inability to counter labor's monopoly \r\nposition in collective bargaining negotiations. A number of \r\ndirectors expressed reservations about the Administration's economic \r\npolicies although most of them endorsed our current monetary policy \r\nof moderate growth in money and bank credit. There was a general \r\nfeeling that senior executives in a broad range of industries shared \r\nthis pessimism and were as a result lowering their sights for \r\ncapital spending and employment.\nOne director who was formerly quite optimistic emphasized concern \r\nabout growing weakness in new orders in his industry: auto and \r\naircraft components. Another director representing a very large \r\noffice equipment manufacturing firm reported that many firms were \r\nlimiting or reducing expenditures for computers and related \r\nequipment and that he expected further cutbacks over the months \r\nimmediately ahead.\nThe following comments were received about the machine tool \r\nindustry, which is important in this District. A director who is the \r\npresident of a substantial machine tool manufacturing firm mentioned \r\nthat, although his competitors are experiencing a slowdown in new \r\norders for machine tools, his company's business continues to be \r\ngood. The chairman of a very large machine tool company \r\nheadquartered in the District informed this Bank that, in contrast \r\nto poor domestic business, his company's plants in European \r\ncountries are booking some 30 percent more orders than a year ago. \r\nAn economist from another large machine tool company said he \r\nbelieved there was definite evidence that business has bottomed out \r\nin his firm, although he saw no signs of an upturn and did not \r\nexpect one until after Labor Day. The same economist, who is highly \r\nregarded in the profession, volunteered the information that there \r\nis \"across-the-board weakness\" in his firm's prices. For example, \r\nprices of metal cutting machine tools, for which there are no \r\nofficial Bureau of Labor Statistics price data, are declining. \r\nSimilar price reductions not reflected in the BLS data were reported \r\nby a director currently engaged in consulting work in the aluminum \r\nindustry.\nOther comments of interest from the directors included mention of \r\nthe fact that the supply situation in the coal industry is so tight \r\nthat some utilities are currently importing coal at prices above \r\ndomestic rates. A director from a large reserve city bank noted a \r\nrecent sizable increase in business loans for current working \r\ncapital\u2014i.e., for \"paying the bills\". One director, the chairman of \r\na large rubber company, reported a highly front-loaded labor \r\ncompensation settlement for his firm. The contract calls for \r\nincreases of 12 percent in the first year, 8 percent the second \r\nyear, and 4 percent the third year.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1970/1970-06-bo

"June 17, 1970\nSeven members of our Board of Directors and three\nwell-known \r\nacademicians were contacted in the preparation of this report. \r\nBecause of noncomparable types of responses as well as wide \r\ndifferences of opinion, no general summary seems possible. \r\nRespondents' viewpoints ranged from serious concern over the \r\neconomic outlook to satisfaction that we are about on course. Their \r\ncomments, as given below, are separated on the basis of real versus \r\nmonetary markets.\nMonetary Conditions and Capital Markets\nProfessor Otto Eckstein characterized capital markets as currently \r\nbeing in a \"most unusual state\", attributing this to (1) the \r\nSystem's switch to aggregate targets, (2) the continuing high rate \r\nof inflation and suspicion that it will not abate, and (3) \r\nuncertainties wrought by Cambodia and\u2014particularly\u2014the stock \r\nmarket. With respect to the Fed's current stance, Eckstein \r\nemphatically pointed out that policy can be judged as having been \r\neasier over the last few months only by a monetarist's standards. \r\nMeasured from any starting month previous to February 1970, the \r\nwidely touted 10 percent annual growth rate of money stock shrinks \r\nto 3 to 5 percent. On top of this moderate rate of growth, Eckstein \r\ninterprets the events of April and May as having led to a greatly \r\nincreased liquidity preference on the part of the public, concluding \r\nthat endorsement of a 4 percent rate of monetary growth during the \r\ncurrent period is \"really somewhat cavalier\".\nProfessor James Tobin concurred with Eckstein on this view of System \r\npolicy, additionally pointing out that with a 4 or 5 percent rate of \r\ngrowth, money supply is shrinking in real terms. Tobin also voiced \r\nfears that the Fed's excessively tight policy in combination with \r\nits shift to aggregate targets has forced interest rates to a point \r\nwell above the real rate of return on capital, a state of affairs he \r\nfeels will depress real activity more than we are bargaining for.\nAt the opposite end of the spectrum was Professor Henry Wallich, who \r\nstated that Fed policy is threatening to become overly easy \"no \r\nmatter how money stock is measured\".\nViews varied also on the causes and the implications of the stock \r\nmarket decline. Wallich feels the principal explanation is the \r\nnecessary, but painful, adjustment of equity markets to a 9 percent \r\nbond market. Tobin, on the other hand, feels the decline has been \r\nserious, stating that it will have both wealth and cost of capital \r\neffects, and that it is symptomatic of a general economic malaise. \r\nWhen viewed from the more regional, micro outlook of our banking \r\ndirectors, money market conditions appeared more optimistic. Only a \r\nmonth ago all three of our Class A directors were reporting \r\ncommercial loan demands at an all-time high at their respective \r\ninstitutions. Two now report that this situation has moderated to a \r\ndegree where their banks can handle it. Our directors also report a \r\nhealthy pickup in deposit inflows over the last three weeks in all \r\ncategories, but particularly in consumer-type deposits. Mr. Kennedy \r\nnoted that for the first time in 1970, deposit figures at his \r\ninstitution are now exceeding year-ago levels. Taken together, these \r\nfactors represent a substantial shift toward optimism among our \r\nbanking directors from a month ago.\nGNP and Real Market Aggregates\nOur academicians shifted positions in their discussion of the \r\noutlook in real markets, with Eckstein becoming the most bullish. He \r\nsees the economy currently hovering between recession and no growth, \r\nbut remains convinced that most of the GNP markdown will occur in \r\nthe first half of this year. While he hasn't made a run on his model \r\nfor about three weeks now, he sees total 1970 GNP falling in the \r\n$982-$985 billion range, with unemployment at 5.0 to 5.2 percent by \r\nthe year-end. Eckstein further offered the opinion that, if we do \r\nhave a recession (however measured), it will be far and away the \r\nmildest of the postwar period.\nWallich similarly sees 1970 nominal GNP winding up in the $980-$985 \r\nbillion range, with a nominal fourth-quarter gain of about $15 \r\nbillion. While he identified unemployment, prices, and interest \r\nrates as all behaving worse than expected, he expressed confidence \r\nthat the nominal GNP forecasts made earlier this year will hold up \r\nquite well. Noting how successive capital surveys have shown a \r\nconsistency, he does not feel that capital expenditure plans are \r\ncollapsing, and he sees the possibility of bringing the GNP deflator \r\ndown to a level of 4 percent by the year-end. On the outlook for \r\nunemployment in the third and fourth quarters, he was somewhat more \r\nbearish than Eckstein.\nTobin once again provided the most gloomy assessment, predicting \r\nunemployment will rise to at least 5 1/2 percent by the year-end, \r\nand very possibly higher. He did not provide us with GNP projections \r\nfor the next two quarters.\nAgain turning to the micro-oriented views of our directors, the \r\npicture is quite mixed. Mr. Robertson of the Bangor Punta Corp. \r\n(aircraft firearms, recreational equipment, farm products, etc.) \r\nreports that sales are continuing a sharp deterioration in nearly \r\nall their lines, with the one major exception the capital goods \r\nproduced in their process engineering division. Their layoffs have \r\nbeen substantial, and capital expenditure plans have been cut back \r\n30 to 40 percent. Other directors, however, noted that layoffs seem \r\nto have subsided in their areas. Messrs. Cabot (Cabot Corp.) and \r\nCarter (Nashua Corp.) report their capital expenditure plans are \r\ncontinuing at or near the levels originally planned, although\u2014apropos of Tobin's point above\u2014Mr. Carter did note that their \r\ncapital spending is becoming increasingly contingent upon securing \r\nreasonably priced financing. Other queries to our directors produced \r\nno shift in sentiment from the views they expressed a month ago.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/1970/1970-06-at

"June 17, 1970\nSummary of Findings\nSixth District directors have mixed opinions \r\nabout future business conditions. If any consensus exists, it is \r\nthat the economy has not yet bottomed out and that recovery will be \r\nless than spectacular when it comes. According to directors' reports \r\nand other sources of information, further weakening in sales, \r\nemployment and production is likely. Department stores report lower \r\nvolume and growing resistance to higher priced merchandise. Belt \r\ntightening by businesses has spread, and directors report many \r\ninstances of slowdowns in capital spending. Employment and \r\nproduction cutbacks are common.\nRetail sales\nDepartment stores surveyed report no discernible shift \r\nfrom the \"upstairs\" to the \"bargain basement\". However, customer \r\nresistance to higher priced brands has increased, with lower priced \r\nmerchandise receiving the benefit. A canvass of merchants by one of \r\nour Branch offices indicated that they expect no improvement in \r\nsales within the near future. Regarding auto sales, distributors \r\ncontacted report some shifting from larger cars to the compact \r\nsized, loaded with optional equipment. Rather than settling for a \r\nstripped-down version of a full-sized car, customers are purchasing \r\nlower priced equipment-packed models.\nBelt tightening\nA profit squeeze is causing many businesses to trim \r\nfat wherever possible. Reports of capital expenditures being reduced \r\nor stretched out have been coming from several sources. A major \r\nairline reports more executives are flying coach, and some companies \r\nare pushing early retirements. Attrition is being allowed to take \r\nits toll, and the workweek is being reduced in some industrial \r\nareas.\nProduction and employment\nCutbacks\u2014some sizable\u2014are occurring in \r\nsteel, furniture, textiles, and rubber and paper products. A large \r\nsteel producer in Alabama and a large aluminum company in Tennessee \r\nare reportedly cutting employment by as much as 20 percent. A \r\nMississippi furniture manufacturer is reported to be trimming \r\nemployment from 2,800 to 1,700. A 500-man cutback is imminent at \r\nanother firm, and a District bank is cutting employment\u2014this one by \r\n10 percent across the board. A regional airline is cutting its work \r\nforce by 100, \"purely as an economy move\". A shorter workweek has \r\nalso been used to adjust output: for example, a major rubber company \r\nis going on a four-day week.\nA strike involving 5,000 workers at the Atomic Energy Commission's \r\nOak Ridge, Tennessee, plant is entering its third month. Gulf states \r\nutilities continue to be picketed, and a walkout involving 1,200 has \r\nidled production at a Birmingham plant. The Florida Power and the \r\nMiami plumbers' strikes have been settled. The plumbers will receive \r\nabout a 25 percent yearly pay boost over the three-year contract. \r\nEmployment is stabilizing at two large military installations \r\ncontacted. Recent employment cutbacks at these two installations \r\nhave been accomplished by normal attrition.\nCapital spending and construction\nMajor utility construction is \r\nstrong and a twenty-story office building will be built in Jackson, \r\nMississippi. Despite postponements in capital spending, there have \r\nbeen some announcements of new plants and plant expansions, \r\nincluding a needle factory in Alabama, a $70 million expansion of a \r\nmining and industrial chemical complex in Tennessee, and a $15 \r\nmillion expansion of an engine plant in south Alabama. Recent \r\ncontacts with four Atlanta building supply companies\u2014two in glass \r\nand one each in cabinets and plumbing supplies\u2014indicate reduced \r\nvolume and price cutting.\nAgriculture\nSoaking rains throughout the District have contributed \r\nto an excellent agricultural outlook. Prices of farm land have \r\nleveled recently after a steady rise, perhaps because of uncertainty \r\nabout farm legislation and high interest rates.\nLoan terms\nA recent survey indicates a slight decline in the \r\naverage interest rate on bank loans from February 15 to May 15. \r\nFirmer nonprice terms, however, nullified the effects of the lower \r\ninterest rate. Loan demand has weakened slightly.\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/1970/1970-06-sf

"Beige Book Report: San Francisco\nJune 17, 1970\nThis report is based upon a survey of Head Office and Branch \r\nDirectors, supplemented by reports from selected businesses. The \r\ngeneral opinion is that the economy is experiencing a mild slowdown, \r\nand there is no expectation of a complete recovery until the end of \r\nthe year. At the same time, there is little optimism that inflation \r\nwill be brought under control quickly. Consumer demand continues to \r\nbe high, although sales are somewhat slower than last year, and \r\nthere is continued demand upon banks for credit. The adverse effects \r\nof the slowdown appear in two principal forms. Unemployment is seen \r\nto be much higher this year, and many firms report experiencing a \r\nprofit squeeze. They say that they are unable to offset by price \r\nincreases or greater sales volume their higher costs. In \r\nconsequence, they are attempting to cut expenses by reducing staffs, \r\ncutting inventories, and delaying capital protects.\nUnemployment has risen in most parts of the District. The highest \r\nlevels are in the Pacific Northwest where the principal problems are \r\ncentered in the lumber industry and Boeing Aircraft. Boeing is the \r\nprincipal employer in the Seattle-Tacoma area, and it has cut its \r\nemployment from over 100,000 in 1968 to 58,000 now, with further \r\nlayoffs announced for the rest of this year to reduce the level to \r\n43,000. Lumber operations have been at a reduced pace throughout \r\nmuch of Washington and Oregon. Apparently the smaller mills are \r\nbearing the major burden, while the large integrated mills continue \r\nto maintain production. There is some expectation of a recovery, at \r\nleast in Oregon, toward the end of the year. The other area with a \r\nmajor unemployment problem is southern California, where the \r\naffected industries are aerospace and, to a less extent, housing.\nConstruction of new residential housing and the opening of new \r\nsubdivisions continue to be slow. The decline in demand is heaviest \r\nin the Seattle area because of the layoffs at Boeing. The principal \r\nstrength is in commercial construction. This is certainly the case \r\nin California where commercial building remains high. In many cases \r\nthere is also a strong demand for mobile homes. This particular \r\nchange may be part of a tendency for consumers to downgrade the \r\nquality of their housing demand.\nRetail sales remain relatively steady despite the rising \r\nunemployment, and they continue to be a source of strength in most \r\nareas. For most kinds of consumer goods, there is no sign of \r\ndowngrading in choice of items as a means of economizing. Consumers \r\nare reported to be more careful in watching for and responding to \r\nsales, but there is no pronounced shift to lower grade goods. When \r\npurchases of major appliances are made, the demand is still for the \r\n\r\n higher-grade line. Replies from major department stores indicate the \r\ngeneral composition of their business is not changed, although sales \r\nare not rising at last year's pace.\nThere is one major exception to this picture. Reports from \r\nthroughout the District indicate that consumers are economizing on \r\ntheir automobile purchases. They are shifting away from middle-line \r\nmodels to lower priced and foreign economy cars, although luxury car \r\ndemand remains high. As part of this shift, there appears to be an \r\nincreased demand for late model used cars. Therefore, there is \r\nevidence of both a reduction of automobile purchases and a \r\ndowngrading of quality of purchases.\nThe recent decline in the stock market has not had any noticeable \r\nimpact on consumer purchases, but it does seem to contribute toward \r\ncreating more general uncertainty on the part of businessmen. One \r\nspecific example of the effect of lower stock prices reported is \r\nthose cases where stock had been used as loan collateral and the \r\nborrowers were forced to sell at a loss to cover the loan.\nMany businesses report that their profit margins are being narrowed \r\nby higher costs, especially labor costs and by an inability to raise \r\ntheir revenue. Sales are not rising to offset the costs, and general \r\nprice increases are not always feasible. In consequence, there is \r\nmore emphasis upon cost reductions. This takes various forms: closer \r\ncontrols over inventories, increased layoffs of employees, and in \r\nsome cases postponement of capital projects. In fact, one of the \r\nclearest responses of individual businesses to this combination of \r\nsmaller profit margins and continued high interest rates appears in \r\nthe reduction of capital spending. One large oil company, for \r\nexample, describes its projects as being continuously reviewed, and \r\nseveral other manufacturing companies report a postponement and \r\nreduction of planned expenditures.\nFinancial pressures are also an element in the slowing of business \r\ncapital expenditures. Several companies reported credit stringency \r\nand high interest costs as factors leading to a revision in their \r\nplans. In one case, foreign financial conditions caused difficulties \r\nfor one company; foreign banks were unable to supply funds normally \r\nutilized by this business. Financial conditions continue to be cited \r\nas an important adverse factor influencing the construction \r\nindustry. This is in spite of deliberate efforts by banks to \r\nallocate funds to meet this demand. Banks are continuing to be \r\nselected in the kinds of loans that they make.\nIn summary, reports of our directors and other businessmen point to \r\na slowing of the pace of economic activity and a greater reluctance \r\non their part to undertake major expenditures in the near future.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/1970/1970-05-bo

"Beige Book Report: Boston\nMay 20, 1970\nDiscussions Monday (May 18) and last Friday with First District \r\nReserve bank directors and other area business leaders failed to \r\nturn up any traces of a crisis mentality in the business community. \r\nThose participants, including representatives of banking, retailing, \r\nand a wide diversity of manufacturing activities, generally showed a \r\nrestrained but marked bullishness.\nThe primary explanation for this outlook was found in the common \r\ntendency to focus on a two to three year period for planning \r\npurposes, while placing little or no emphasis on the adverse \r\ndevelopments which may occur in the next two to three quarters. In \r\nshort, the businessmen are focusing on the far side of the valley, \r\nhaving already discounted any reasonable downturn which might \r\ndevelop this year.\nIn support of this psychology, it may be noted that a common remark \r\nof both merchants and manufacturers was that volume is holding up \r\nwell, but profits are off sharply. Nevertheless, no instances were \r\nfound in which this had yet led to a curtailment of capital \r\nexpenditure plans for the rest of 1970, and corroborating evidence \r\nof this is found in the observation of three different commercial \r\nbankers that business loan demand had risen to historic highs in the \r\nlast week or two at their institutions. They also uniformly noted \r\nthat current interest rate levels are in no way deterring commercial \r\nloan demand.\nVery little mention of the depressed state of the stock market was \r\nnoted among the business leaders contacted, suggesting that they \r\ntend to view it as a separate entity, with few potential \"spillover \r\neffects\" on the course of real economic activity. Nor did the \r\ntrucking strike elicit much comment as a depressing factor. \r\nApparently, the wholesale and retail sectors have largely escaped \r\nany severe effects by means of a greatly increased reliance on the \r\nUnited Parcel Service, and in some instances, parcel post. Among \r\nmanufacturers, serious truck strike effects seem to be highly \r\nspotty. As an example of firms which have been affected, the Cabot \r\nCorporation, large supplier of raw materials to the tire industry, \r\nreports increasing shipments problems.\nThe machine tool and producers' durable industries present a mixed \r\npicture. The Torrington Corporation, large manufacturer of ball \r\nbearings for automotive use, has definitely felt the decline in auto \r\nproduction, but reports that orders in farm equipment and two-cycle \r\nengines have risen more than enough to offset it. Layoffs have been \r\nnegligible, and capital expenditure plans revised only slightly. The \r\nNorton Corporation reports a similar situation in its machine tool \r\nlines, but notes a definite softening of orders in its industrial \r\nabrasives division. On the other hand, Mr. Keyser of our board of \r\ndirectors reports a statewide softening of machine tool activity in \r\nVermont.\nThe recreation industry in northern New England has experienced \r\nrecord levels of revenues all winter and thus far into the spring, \r\nalthough merchants in these areas as well as on Cape Cod do report \r\nsome slack in advance bookings for the coming summer.\nOn the financial side, commercial banks report their deposit \r\nsituation as largely stable, with no prospects for normal growth in \r\nthe near future. Such weakness as was reported seems concentrated in \r\ncorporate CDs and individual demand deposits. Thrift institutions, \r\non the other hand, are in a worse position, with May deposit losses \r\nalready offsetting most of their March-April gains. One- to three-family residential housing sales have declined drastically over the \r\nwinter in most of the New England urban areas, and apartment \r\nconstruction is also showing signs of letting down.\nIn summary, neither continued tightness in credit markets nor \r\nprospects for substantial declines in profit levels over the rest of \r\nthe year have yet acted to dissuade the business community from its \r\nbasic outlook. A marked letdown in consumer spending would probably \r\ndo so, but no signs of one have developed to date.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/1970/1970-05-cl

"Beige Book Report: Cleveland\nMay 20, 1970\nEconomic activity in the District has been disrupted during the past \r\nsix weeks largely because of trucking strikes and strikes against \r\nseveral major rubber companies. Widespread campus disturbances in \r\nthe District have forced a number of universities to close and \r\nundoubtedly have had an adverse impact on business conditions in \r\nlocal areas. This Bank's regular monthly survey of about 70 large \r\nmanufacturing companies in the District reflected the softening in \r\nnationwide industrial activity last fall and early winter. Signs of \r\na bottoming were evidenced in the survey taken in April, but the May \r\nsurvey revealed sharp setbacks during the month of April in key \r\nseries such as new orders and shipments and a marked deterioration \r\nin employment and the workweek, presumably because of work \r\nstoppages. The District's insured unemployment rate, which had been \r\nedging moderately upward (from 1 percent last October to 2 percent \r\nin late March), jumped one percentage point during April to 3 \r\npercent.\nAt a meeting of about 40 business economists, held at the Bank on \r\nMay 15, there were mixed reports concerning recent price behavior. \r\nThe majority maintained that wage-cost pressures, in the face of \r\nslack demand, are so great as to make it easy to \"pass on\" higher \r\nprices. Some economists, however, reported \"under the table\" \r\ndiscounting and price rebates, which presumably are not being \r\nrecorded in the official price indexes. Specifically, an economist \r\nfrom a major rubber company said his firm's price index for tires, \r\nbased on actual transactions prices and reflecting the mix of \r\nconsumer purchases, had risen during the past year only about\none-third as much as the BLS price index for tires. Economists from the \r\nchemical industries reported recent weakness in chemical prices and \r\nnoted that few chemical products were selling at list prices.\nOther points of interest emerging from the meeting included a report \r\nby an economist from a large machine tool company in Cleveland that \r\nhis firm was living off backlogs, that business booked in April was \r\nonly one-quarter of what they would normally receive at this time of \r\nthe year, and that they had not yet booked a single new order in \r\nMay. Economists from two major auto companies believed the worst of \r\nthe cutback in new car sales and production was over and that, \r\nfollowing leveling tendencies in the second and third quarters, \r\nsales would recover later in the year. Economists from the steel \r\nindustry expect the current favorable trade balance in steel to \r\ndeteriorate later in the year, with a strong increase in imports and \r\nan easing in exports. On the other hand, the steel industry should \r\nsoon begin to feel the effects of hedge buying in anticipation of a \r\npossible strike next year.\nAmong the comments received from this Bank's directors at a joint \r\nboard meeting held on May 14, there were reports that markets for \r\nauto components and consumer electronics are becoming softer. One \r\ndirector said that one industry in which his firm is a major factor, \r\nflat glass, is\u2014and would remain\u2014in the doldrums until auto \r\nproduction and construction show improvement, but he was not \r\noptimistic. Several directors emphasized that the demand for coal is \r\nthe greatest since World War II; stockpiles are low and there is \r\ndifficulty in receiving supplies. (This implies continued upward \r\npressure on coal prices, which have risen considerably during the \r\npast year; also \"brownouts\"are likely this summer.) One director, \r\nthe dean of a graduate school, reported that this year's graduates \r\nare harder to place. The market for Ph.Ds, especially mathematicians \r\nand statisticians, is suffering, reflecting the cutback in \r\nGovernment grants and other financial support for education. \r\nDirectors from large banks said they are struggling to maintain \r\ntheir deposits, while directors from country banks were experiencing \r\nrising time deposits.\nSome recent conversations of this Bank's officers within the \r\nDistrict in recent days indicate that businessmen expect corporate \r\nprofits to be off sharply in the second quarter because of the \r\ntrucking strikes and the slack in business. Some of the businessmen \r\ncontacted expect a minor recovery in profits in the third quarter, \r\nbut do not look for any major improvement before the final quarter \r\nof 1970.\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/1970/1970-05-sf

"Beige Book Report: San Francisco\nMay 20, 1970\nGeneral\nThere is no consistent pattern of views and anticipations \r\nregarding economic conditions in the Twelfth District. Moderate \r\ngrowth in business characterizes the District generally, including \r\nboth Washington, one of the hardest hit sections, and Arizona, \r\npreviously showing the greatest growth. Declining output and \r\nemployment in some parts of Oregon are continuing and spreading, \r\nwhile both buoyant and depressed conditions are reflected in various \r\nareas of Southern California.\nRandom Notes by Industry\nReports on recent agricultural conditions \r\nvary from \"agricultural disaster due to weather\" and \"agricultural \r\nrecession\" to \"excellent growing conditions and bumper crop \r\nprospects.\"\nLogging and lumber mills continue slow, with outlook favorable until \r\nmid-1971. The layoff rate has been reduced at one large aerospace \r\nfirm, but is becoming manifest in a limited way in some other \r\nindustries. In education, wages are \"high\" despite heavy demand for \r\nthe scarce new positions. Severe gasoline price wars are evident in \r\nmany locations, aggravated by the introduction of new types of \r\ngasoline.\nHousing generally continues in short supply with construction \r\ndepressed, while apartment vacancy rates vary from low to very \r\nsubstantial. Industrial and commercial construction is \"fairly \r\nactive\" in Utah. One manufacturer reports a volume market and good \r\nprices. Another reports a profit squeeze; he was \"forced to raise \r\nprices against a soft market; the raise was accepted as unavoidable\" \r\n(except for the attempted cut in distributors' margins).\nSummary for Selected Economic Aspects\nEmployment\nNew jobs are becoming less easy to find, actual cutbacks in total employment are \r\noccurring in an increasing number of firms as a part of cost-reduction programs. Significant expiration of unemployment \r\ncompensation benefits is expected in June and July in one area.\nStrikes\nBoth current and anticipated labor difficulties were \r\nmentioned.\nWages\nWage conditions vary from constant to rising. There is even \r\nwider anticipation\u2014except in strictly agricultural communities\u2014of \r\nfuture wage boosts.\nOther Costs\nIncreasing costs of purchased goods were mentioned, \r\nbut one respondent writes that \"dealers are selling equipment at \r\nbelow cost to reduce inventories.\"\nPrices\nPrices on the respondents' own products vary from \"recently \r\nstrengthened markedly\" to \"started declining about 30 days ago.\" \r\nHigher posted prices and competitive price-cutting left one \r\nindustry's average retail price higher on balance; expectations are \r\nfor hardening prices. Despite a slowdown in one area, a strong \r\nupward price trend was noted. In another, upward pressures are \r\nexpected to continue with the rates of increase \"diminished from \r\nthose of recent experience.\"\nProfits\nIn one industry expecting both wage increases and \r\nemployment cutbacks, \"a number of companies have announced that they \r\nexpect slow improvements in net earnings as 1970 proceeds.\"\nMarket Psychology\nIn one sensitive-commodity industry, \"the \r\npsychology of buyers and sellers has changed recently\" (in a \r\ndeflating direction): \"the tendency of buyers is to go increasingly \r\nto a hand-to-mouth basis.\"\nSales\nSales reports vary from \"curtailed\" through \"constant\" to \r\n\"up.\" Higher new orders and lengthening delivery time were noted in \r\none community. In the Portland zone retail sales \"have reflected a \r\ndefinite improvement within the last 30 days,\" in contrast to the \r\nmore general expectation in that zone of even more softening in \r\nretail sales.\nInventories\nBoth higher and lower inventories are reported.\nPlant and Equipment Investment\nBoth high and low levels of capital \r\nspending, as well as \"no change,\" are reported, with cutbacks more \r\nfrequently mentioned.\nCredit\nAccording to the banker respondents, \"ample\" to \"adequate\" \r\ncredit is available. Users of credit vary in their judgments on this \r\nscore from \"a little easier to obtain,\" through \"very difficult, but \r\nnot substantially more so than a year ago,\" to \"very tight for \r\nagricultural loans from commercial bank sources.\"\nBank liquidity short of distress was noted. Expansion of several \r\nretirement communities is currently being held up for lack of funds. \r\nA continuing increase in overdue or delinquent receivables was \r\nreported, partly attributable to strike-induced delays. A large \r\ninternational conglomerate indicated that accounts receivable have \r\nslowed from 70 to 80 days; the very substantial costs involved could \r\nnot be passed on.\nPolicy\nIn one community the impotence of monetary policy and the \r\nneed for wage and price controls had become the subject of common \r\ndiscussion on the street. Elsewhere the lack of needed wage-price \r\nguidelines was noted, with the \"unconscionable increase in \r\ninflationary conditions in services\" emphasized.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/1970/1970-05-da

"Beige Book Report: Dallas\nMay 20, 1970\nContinued inflation is the major concern of Eleventh District board \r\nmembers surveyed at a mid-May meeting in Dallas. A recession is \r\nconsidered possible by a number of the board members, but this \r\nprospect is causing less concern than inflation since there is a \r\nwidespread belief among the directors that a recession would be \r\nshort and mild. A liquidity crisis is mentioned as a possibility by \r\nonly one-third of the respondents, and the odds attached to this \r\noutcome are relatively low. With this overall economic outlook, the \r\nboard members expected sales to show no increase or only a small \r\nincrease in 1970, while profits are expected to decline. One \r\ndirector thought there might be a fall of more than 5 percent in \r\nboth sales and profits.\nEvery board member reported that employee wages in their firms were \r\nbeing increased in 1970. This direct experience with higher wage \r\ncosts may be one reason for the almost unanimous concern with \r\ninflation, ahead of other economic problems. The smallest wage \r\nincrease (4 percent) was cited by an academic leader, while the \r\nlargest (10 percent) was mentioned by a banker. The nonbanking \r\nbusinessmen mentioned 6 percent most often as the wage adjustment \r\nthey were making this year.\nThe respondents were unanimous in their view that the Federal budget \r\nwould operate with a deficit this year. Apparently, the \r\nAdministration's forecast of a budget surplus is not accepted within \r\nthe business and financial community, although a few directors \r\nthought the deficit might be small.\nDespite some concern about a mild recession, acknowledgment of \r\nhigher labor costs, and a generally poor outlook for profits this \r\nyear, there were no reports of employment cutbacks by the bankers \r\nand businessmen interviewed and no indication that employment cuts \r\nwere currently being considered. In fact, plans for very modest \r\nexpansion of the labor force were noted by a couple of respondents. \r\nThis reported maintenance of employment levels is consistent with \r\nthe aggregate data for the Eleventh District, which show total \r\nemployment still edging upward. The increase in employment, however, \r\nhas not been sufficient to absorb all of the new labor force \r\nentrants in the District states. Thus, there has been an increase in \r\nunemployment in the Eleventh District since the end of 1969, and \r\nunemployment insurance activity is at a considerably higher level.\nThe respondents to our survey did note some softening in planned \r\nplant and equipment spending. More than half indicated that their \r\nJanuary expectations had been revised downward; the estimates of the \r\nmagnitude of the downward revision were vague but apparently \r\nindicated, in most cases, trimming around the edges rather than \r\nwholesale slashing. An executive of one major manufacturing concern \r\ndid indicate that planned plant and equipment spending was \r\nundergoing a \"substantial\" cutback.\nThe Texas industrial production index edged up in March, but has \r\ngenerally flattened since the beginning of 1970. Increased demand \r\nfor petroleum and petro-chemical products has helped to strengthen \r\nthe economy in both Texas and other District states. Oil production \r\nin the Eleventh District has remained near record levels throughout \r\nthe spring, usually a period of seasonal slack.\nAt the same time, drilling activity has been rebounding from a 27-year low. Construction contract activity in the District showed \r\nrenewed strength in the first quarter of 1970, compared with either \r\nthe year-earlier period or the fourth quarter of 1969. Nonbuilding \r\nconstruction contracts were up considerably, buoyed by two very \r\nlarge contracts; nonresidential contracts also showed a sizable \r\nincrease. A seasonal expansion in construction employment has \r\noccurred this spring, although the gain came earlier and was \r\nsomewhat less than usual.\nDepartment store sales in the Eleventh District through early May \r\nwere up moderately in dollar value, but less than the amount \r\nrequired to offset inflation. Sales in early May appeared somewhat \r\nstronger than has been the case for the year as a whole so far.\nAgricultural activities throughout most of the Eleventh District are \r\nprogressing under generally favorable weather conditions. Cash \r\nreceipts from farm marketings in the District states were up \r\nsubstantially in the first two months of 1970, compared with year-earlier levels.\nLoan demand in the Eleventh District remained sluggish in April, as \r\ntotal loans at weekly reporting commercial banks declined \r\ncontraseasonally. With both time and savings deposits increasing, \r\nDistrict banks added considerably to their holdings of securities, \r\nparticularly municipals. Time deposits have increased recently due \r\nmainly to the sale of large CDs. Some tightening in District bank \r\nreserve positions in April is reflected in the increase in weekly \r\naverage net Federal funds purchased and in discount window \r\nborrowings, compared with the March 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/1970/1970-05-at

"Beige Book Report: Atlanta\nMay 20, 1970\nThe mood of our directors varies from pessimism to optimism. If any \r\nconsensus exists, it is that business activity in the Sixth District \r\nwill continue to weaken slightly. Many major economic indices should \r\ndrift downward or mark time for the next two months at least.\nIn the pessimistic vein, a leading department store recently \r\ninformed us that their sales are even with a year ago, but only \r\nbecause of the addition of branches; unit sales, of course, are \r\nlower. The store reported that labor costs were up 8 to 10 percent \r\nand profits were off. They were pessimistic about future department \r\nstore sales and did not anticipate a quick economic recovery. A \r\ntelephone survey of department stores indicates this conclusion is \r\nshared by many retailers throughout the Southeast.\nAccording to directors' reports, retail sales in some areas have \r\nbeen adversely affected because of a diversion of purchasing power \r\nto private schools which have sprung up in response to integration \r\norders. Lumber mills in many areas have not been operating at \r\nprofitable levels, and one major mill is planning to close down \r\noperations for three to six weeks to adjust inventories. A recovery \r\nin this industry is anticipated by the end of the year. The coal \r\nindustry in Tennessee is also stymied at the Mine Safety Act, with \r\nwhich the industry claims it is impossible to comply.\nThe temporary closing of oil leasing in the Gulf because of\noil-slick problems continues to cause a slump in the Louisiana Gulf \r\nCoast area. The outlook for the immediate future is pessimistic. \r\nDifficulty in obtaining insurance will also continue to hold up \r\nconstruction in the wake of Hurricane Camille. Also, a strike by \r\n2,600 workers at Gulf States Power is hamstringing new construction \r\nin Baton Rouge and other areas served by this utility.\nThe employment outlook remains bleak at the large number of military \r\nand aerospace installations in the South. Financial districts of \r\nmajor metropolitan areas are expected to continue to experience a \r\nreduction in employment occurring throughout the brokerage business, \r\nand there has been some reduction in employment at a large bank.\nA recent canvass of institutional mortgage lenders indicates \r\npessimistic outlook for single- and multi-family housing starts. \r\nAtlanta and Miami were the only moderately bright spots.\nHigher prices of vegetables, peaches, and other agricultural \r\ncommodities may be in prospect because of lower crop estimates and \r\ndelayed plantings. Production estimates of citrus fruit, however, \r\nremain bullish despite a mild drought.\nOn the optimistic side of the ledger, many new plant locations and \r\nlarge-scale construction projects have been reported recently. For \r\nexample, central Alabama will be receiving a modular home plant, a \r\npoultry plant, and a foundry for production of parts for automobiles \r\nand other products. In southern Louisiana, a new chemical plant has \r\nbeen announced and a large addition to an existing plant is planned. \r\nIn the Birmingham area, a rash of construction projects has been \r\nannounced. In the New Orleans area, plans for a new shopping center \r\nand another large motel have been announced. Potential public \r\nconstruction in that area includes a large bridge, an airport, and a \r\nstadium.\nOne director has reported a sizable increase in new orders because \r\nof a revival of capital projects that had been postponed last year.\nA real bright spot in our District has been the Orlando area, where \r\nconstruction should continue to boom as Disneyworld gains momentum. \r\nConstruction will soon be commencing on a very large residential \r\nproject south of Orlando.\nIf a tentative wage settlement is ratified by ground workers of \r\nNational Airlines this week, it will provide a stimulus to activity \r\nin southeast Florida in the coming weeks.\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/1970/1970-05-kc

"Beige Book Report: Kansas City\nMay 20, 1970\nConsensus Based on Discussions with Members of the Board of \r\nDirectors. Perhaps the most pervasive comments revolve about \r\nconstruction industry wage settlements. The extremely high national \r\nrate of wage increase is mirrored in the District, but of more \r\nsignificance, current and emerging wage demands will probably give a \r\nnew lift to the national spiral. Construction is at a standstill in \r\nsome areas of the District, as new wage bargaining proceeds. \r\nExcessive increases in construction costs are an important part of \r\nthe reason for the reduced volume of new construction awards, which \r\nwill show up in reduced construction activity six months or so \r\nhence. Even now, it is reported, there is a virtual absence of small \r\nconstruction projects of $750,000 or less.\nThe magnitude of wage increases in construction, and in other \r\nindustries as well, is causing many to doubt the validity of \r\nattempting to bring wage-cost inflation under control by monetary \r\nand fiscal policies. There is a strong belief that stabilization \r\ngoals can be accomplished only if the unbridled power of labor \r\nunions is curbed. In this connection, it was noted that some local \r\nmemberships in their push for large gains have effectively \r\noverthrown the guidance of national leaders. It was interesting, \r\ntoo, to hear that the top construction company in the United States \r\nlast year is a nonunion firm.\nRetail sales are reported in the range of from firm to down by \r\nvarying amounts. Where sales were reported weak, it was indicated \r\nthat the public is deeply concerned about the prospect of recession.\nDespite excellent production prospects, producers of farm crops are \r\ndiscouraged by low prices for many of these crops. Bankers in the \r\nHigh Plains report that increasing numbers of farmers, particularly \r\nwheat farmers, are quitting because of low prices and restricted \r\naverage allotment programs. The attrition appears to be \r\nsubstantially higher than the average for other recent years caused \r\nby the changing structure of the industry. The livestock sector \r\ncontinues to remain relatively favorable. However, the impact of \r\nhigher livestock prices is expected to be offset by increasing \r\ncosts, resulting in little change in net farm income measured in \r\ncurrent dollars. Consequently, net farm income measured in real \r\nterms is likely to be down.\nThe 8-percent increase in net farm income in 1969, combined with \r\nefforts of farm producers to increase efficiency by going to larger \r\nequipment and other technological improvements, has caused purchases \r\nby farmers to increase. Farm machinery dealers report sales of farm \r\nequipment to be unusually good. They are fearful, however, that to a \r\nconsiderable extent current sales are being made at the expense of \r\nnormal future sales. Conversation with farm purchasers indicates \r\nthat they are buying now because they expect equipment prices to \r\nrise substantially as new union contracts are negotiated. Farm \r\nimplement people expect Walter Reuther's death to make bargaining in \r\nthe farm machinery industry more difficult.\nIt is apparent that most Board members do not believe that a \r\nrecession will be an acceptable route to the goal of price \r\nstability. While they probably would not argue that the economy is \r\nin recession, the course of developments and the sharp April rise in \r\nunemployment tend to strengthen the view that the economy is headed \r\nin that direction.\nBanker members of the Board are concerned with the continuing effort \r\nto limit overall credit growth by restricting growth in the banking \r\nsystem. They believe that this already has gone too far in squeezing \r\nbank liquidity. Moreover, they argue, monetary policy is forcing too \r\nmuch banking outside of banks and this is potentially dangerous. The \r\nresort to commercial paper financing by business firms is cited as \r\nan obvious example. The removal of interest rate ceilings on large \r\nCDs would be a step in rectifying some of the current difficulties \r\nand potential problems in this regard.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/1970/1970-05-ri

"May 20, 1970\nProduction, Sales, and Inventories\nDistrict survey respondents, except for those in certain trades and services, indicate declines \r\nrecently in retail\nsales\u2014particularly automobiles. This continues a \r\nslackening trend evident in this District throughout the current \r\nyear. Manufacturers also report declines in shipments, new orders, \r\nand backlogs of orders,, This situation apparently pervades both \r\ndurable and nondurable lines and remains typical of the District's \r\nlargest industry, textiles.\nInventories are reported to be substantially unchanged from the \r\nprevious month in manufacturing as well as in retail trade. \r\nManufacturers, however, report higher levels of inventories than \r\nthey desire, while retailers report inventory levels to be somewhat \r\ndepleted.\nEmployment and Unemployment\nEmployment is reported to have declined \r\nin the District during the past month, in manufacturing as well as \r\nin trade and services The decline continues a generally weakening \r\nemployment situation existing since January. Hours worked per week \r\nhave been reduced further, and initial claims for unemployment \r\ninsurance apparently continue high. On the other hand, District \r\nbusinessmen indicate that good employees are still scarce in both \r\nthe skilled and unskilled categories.\nWages and Prices\nDistrict manufacturers report increases in both \r\nwages and prices over the past month as they have consistently done \r\nfor the past year. Businessmen in trade and services indicate an \r\neven more pronounced upward tendency. Scattered indications of price \r\ndeclines have appeared in the textile and furniture industries.\nConstruction\nResidential construction activity in the District \r\nremains severely depressed. Nonresidential construction, however, is \r\nreported to have increased slightly\u2014a reversal of previous months' \r\nreports.\nLoan Demand\nDistrict bankers report that the demand for mortgage \r\nloans increased significantly during the past month. A number of \r\nbankers, however, indicate reluctance to accommodate this demand due \r\nto statutory rate ceilings and other factors. Business loan demand \r\nis reported to have increased somewhat over the past month as well, \r\nwhile consumer loan demand is apparently unchanged.\nOutlook\nUncertainty pervades the economic outlook among District \r\nbusinessmen and bankers due to both economic and noneconomic \r\nfactors, including domestic social unrest and recent developments in \r\nthe Vietnam War.\nCapital Spending\nSurvey respondents in manufacturing, particularly \r\nnondurable goods, indicate plant and equipment capacity to be in \r\nexcess. Respondents in trade and services report their capacity to \r\nbe inadequate. Both groups, however, apparently plan further \r\nincreases.\nReserve bank directors confirm this consensus and report that, even \r\nin some instances where current capacity is more than adequate, \r\nspending plans are not being curtailed and are even being increased \r\nin certain cases due to a general feeling that inflationary \r\nconditions will continue.\nInventory Investment\nManufacturers report current inventory levels \r\nto be excessive, but businessmen in trade and services feel they are \r\ntoo low, Reserve bank directors indicate a similar mixture of \r\nopinion. Adjustments are apparently still going on, and some \r\nrespondents indicate that, while the largest share of inventory \r\nreduction has already passed, few significant increases are being \r\nplanned.\nGeneral Conditions and Consumer Spending\nThere is a consensus among \r\nDistrict bankers that further declines are ahead for general \r\nbusiness activity in the District. Moreover, Reserve bank directors \r\nindicate that consumer spending plans are being adjusted downward \r\nsomewhat, reflecting largely a feeling of uncertainty over the \r\nfuture course of the national economy.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/1970/1970-05-mi

"Beige Book Report: Minneapolis\nMay 20, 1970\nAlthough indications of softening in the Ninth Federal Reserve \r\nDistrict are not as apparent as in the rest of the nation, various \r\npieces of quantitive and qualitative evidence suggest that the rate \r\nof District economic growth has at least slowed down. At the same \r\ntime, however, there does not seem to be any diminution in the \r\ninflationary psychology of area residents. Consumers apparently are \r\ncutting back on their level of consumption, and scattered instances \r\nof businessmen either postponing or at least stretching out some of \r\ntheir capital expenditures are being noticed. Currently, a number of \r\nconstruction workers in the District are on strike and indications \r\nare that most of these strikes will last for awhile. Information \r\nrelating to the Teamsters' strike is very sketchy, but it appears \r\nthat some firms are beginning to be affected.\nDuring the go-around at the last meeting of the Board of Directors \r\nof the Federal Reserve Bank of Minneapolis, the directors generally \r\nfelt that business conditions were softening. As evidence of these \r\nobservations, the directors cited such things as unemployment \r\nincreasing in their areas, retail sales becoming sluggish, \r\nbusinessmen hesitating to build up inventories, and an almost \r\nuniversal observation of slowing in auto sales. In addition, one \r\ndirector was aware of a case where a steel company supplying the \r\nauto industry has cut back its orders of iron ore pellets. One \r\ndirector, on the other hand, observed that lumber and wood products \r\nmanufacturers in western Montana have become optimistic in their \r\nexpectations of sales during the latter half of this year. These \r\nproducers were severely affected by the downturn in housing \r\nconstruction, but not expect their sales to increase with the \r\nanticipated upturn in housing.\nIn spite of the business slowdown, the directors felt that \r\ninflationary psychology has not abated in their local areas, but \r\nthat recent events in Indochina have not had a discernible separate \r\neffect on inflationary psychology. They also felt that people are \r\nconcerned not only with the effect of inflation, but also with all \r\nother areas of unrest in this country. One director addressed \r\nhimself to the discriminatory impact of inflation. Although he was \r\ncareful to point out that the problem was also due to other factors, \r\nhe felt that farmers are feeling the ill effects of inflation while \r\nnot sharing in the benefits. For example, he said that while farmers \r\nrecently have had to pay more for input items, the prices of their \r\nproducts have not increased accordingly. As a result, the profits of \r\nfarm operations have fallen off.\nScattered pieces of information suggest that area businessmen may be \r\npostponing or at least stretching out their capital expenditures. \r\nDuring the first three months of this year, the valuation of \r\nbuilding permits issued for nonresidential building in the Ninth \r\nDistrict were about 9 percent below the comparable year-earlier \r\nperiod. After adjusting for cost increases over the past year, this \r\nimplies that nonresidential building activity is about 16 percent \r\nbelow a year ago. In addition, one director was aware of a \r\nmanufacturing firm in his area that has set back the letting of \r\ncontracts from 60 to 120 days. Also, a Minneapolis-based milling and \r\nfood related conglomerate reported recently that they had cut back \r\ntheir capital expenditures. During the current fiscal year they \r\nexpect to spend about $5 million for fixed capital, an amount down \r\nsubstantially from the $8.2 million spent last year. Two cases were \r\ncited at the recent directors meeting, however, which are expected \r\nto lead to increasing capital expenditures. In one case, it was \r\nstated that a railroad based in the Ninth District would have to \r\nexpand its capital expenditures to take advantage of the economies \r\nof scale inherent in a recent merger of four lines. In the second \r\ncase, a copper producer in the Upper Peninsula of Michigan has \r\nundertaken a housing program which, when completed, will double the \r\nsize of the town in which the mine is located. The ostensible reason \r\nfor the new program was to shorten the commuting time of workers, \r\nfor a number of their employees are now commuting daily from points \r\n50 to 100 miles away.\nMajor construction contract negotiations are underway in two \r\nsections of the District. In Minnesota about 10,000 to 12,000 \r\nworkers are currently out on strike and about 15,000 to 20,000 \r\nworkers are directly affected. Although some disputes have already \r\nbeen settled, the majority of union contracts expiring this spring \r\nare still in the process of negotiation. In general, completed \r\nnegotiations call for wages to increase by more than 50 percent over \r\nthe next two years. The strikes still in progress are expected to \r\ncontinue throughout the next three to four weeks.\nIn the highway and heavy construction sectors, the carpenters and \r\nTeamsters have settled, but the operating engineers appear to be a \r\nlong from settlement. According to a recent newspaper article, \r\noperating engineers in Minnesota reportedly turned down an offer \r\nthat would increase their wages by 55 percent over the next two and \r\na half years presumably because of union dissatisfaction regarding \r\nthe timing of the increases. In the building construction trades, a \r\nnumber of strikes are still in progress and probably will not be \r\nsettled for at least three to four weeks.\nIn South Dakota, contract negotiations are underway in Sioux Falls \r\nand Rapid City, the only unionized areas in the state. All building \r\nconstruction has been shut down in Sioux Falls as a result of a \r\nstrike by the operating carpenters are in the process of negotiating \r\nnew contracts, but are still working. The unions are requesting wage \r\nincreases of about 15 to 20 percent per year over the next three \r\nyears as opposed to the 10 percent to 12 percent per year increase \r\nreceived at the time of the last settlement three years ago.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/1970/1970-05-ch

"Beige Book Report: Chicago\nMay 20, 1970\nIn published statements and private conversations a deep mood of \r\npessimism prevails in the Seventh District. Developments in \r\nSoutheast Asia and the Middle East, racial strife, student unrest, \r\nhigh interest rates, the decline in the stock market, the squeeze on \r\nprofits, the persistence of price inflation, rising unemployment, \r\n\"unreasonable\" labor demands, and strikes (especially the truckers' \r\nstrikes) are likely to be mentioned in any discussion of recent \r\ntrends and future prospects. Probably some decisions are being \r\ndelayed pending clarification of current uncertainties. Whatever the \r\n\"facts\" may be, a correspondent writes, \"Men's thoughts control \r\ntheir actions.\"\nOne of the problems in drawing a consensus by citing individual \r\nviews on developments at the present time is that for every \r\nassertion an antithetical view could be offered. Some advocate price \r\nand wage controls; others regard such controls as anathema. Some \r\ndemand that the Federal Reserve System ease credit, others insist \r\nthat policy should have remained highly restrictive. Some worry over \r\nrising unemployment; others believe a \"shakeout\" is essential. Some \r\nexpect a continuing decline in real activity through 1970; others \r\nare sure that the low point is past or near at hand. Some bankers \r\nthink loan demand remains as strong as ever; others believe demand \r\nhas eased.\nThe truckers' strikes and lockouts had a deep impact in the Seventh \r\nDistrict in April and May, particularly in the Chicago area. Output \r\nof steel, autos, appliances, radio-TV, machinery and equipment, and \r\nmany other goods has been slowed\u2014some plants are closed completely. \r\nSome construction projects using structural steel have been \r\nvirtually at a standstill. Some retailers have been unable to obtain \r\ncertain goods. In the Chicago area, it is estimated that 125,000 \r\nworkers are out of work currently because of the strikes, in \r\naddition to about 40,000 truck drivers.\nIncreasing uncertainties have entered the capital goods picture. \r\nMost statements of construction machinery producers indicate sales \r\nto distributors have been good, but one large producer reports \r\ninventories piling up at the dealer level. Among capital goods, \r\nmachine tools have been hard hit by order declines. Machine tool \r\noutput has not declined as much as orders, but some surplus capacity \r\nhas developed. As a result of rainy weather, crop plantings have \r\nbeen delayed and farm machinery sales continue weak.\nConstruction declines are largely confined to single-family homes. \r\nCarpenters have become more readily available, but most building \r\ntrades continue in short supply. Mortgage money is believed to have \r\neased \"dramatically\" in the Detroit area.\nOrders for major household appliances have improved in recent \r\nmonths. Demand for certain consumer residential goods, including \r\nmotorcycles, golf carts, and bicycles is excellent\u2014pressing \r\ncapacity to the limit in some cases.\nAlthough output schedules for autos indicate a strong revival in May \r\nand June, pessimism in automotive centers has been spreading. \r\nPerhaps this reflects the failure of retail sales to confirm \r\nexpectations of improving demand.\nDevelopments in the steel industry are so clouded by the truck \r\nstrikes that generalizations on order trends are not possible, but a \r\nshort-term increase in output is certain when the strikes are \r\nsettled.\nJob markets have eased in all major areas, but there has been no \r\nsignificant improvement in the supply of trainable younger workers. \r\nThe easing of supply of college graduates has been dramatic. Summer \r\njobs for undergraduates are scarcer than at any time in recent \r\nyears. Many experienced executives are seeking jobs, partly as a \r\nresult of the \"fine combing\" of white collar staffs. A student \r\nseeking summer work at a large automotive firm was asked, \"Why do we \r\nwant trainees when we're firing vice presidents?\"\nComplaints over \"tight money\" are widespread. Increased concern is \r\nexpressed over the \"liquidity squeeze,\" especially in small- and \r\nmedium-sized businesses. Payments frequently are delayed, but there \r\nhas been no significant rise in outright defaults or bankruptcies. \r\nComments on the strength of loan demand vary from bank to bank. This \r\nmay reflect varying degrees of emphasis on the means by which \r\npotential customers are discouraged.\nA large bank states its \"average cost of money\" is 8-1/4 percent. \r\nBanks are not now able to raise CD money at ceiling rates. The \r\ncommon view of lenders and borrowers is that interest rates will \r\neither remain high or rise somewhat. However, there are indications \r\nthat some corporate bond issues are being postponed and are awaiting \r\nmore favorable conditions.\nDistrict analysts who emphasize the \"money supply\" expect the \r\ndecline in activity to last at least through the third and probably \r\nthe fourth quarter.\nOf course, there are many who believe the decline in the stock \r\nmarket presages a much more severe drop in general business than is \r\nyet apparent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/1970/1970-05-ph

"Beige Book Report: Philadelphia\nMay 20, 1970\nThe business slowdown in the regional economy is now in its seventh \r\nmonth, according to a recent poll of business opinion. Results from \r\nthe May business outlook survey show that most manufacturers \r\ncanvassed in the Third Federal Reserve District are experiencing \r\neither no change or actual declines in sales and new orders. \r\nMoreover, sales for April did not live up to expectations, \r\nindicating the current slump is somewhat more pronounced than \r\nanticipated earlier. However, area executives polled see no further \r\ndeterioration of business activity in the immediate months ahead.\nIn addition, optimism remains high for regional activity over the \r\nlonger term. Since January, a majority of manufacturers polled have \r\nheld rising expectations for the second half of 1970. At latest \r\ncount, more than two out of three area industrialists see a pickup \r\nin the economy during the fall and winter of 1970.\nUnderlying this bullish outlook is an expected jump in both new \r\norders and sales by yearend. Despite this anticipated acceleration \r\nin business activity, a majority of area manufacturers do not expect \r\nto add to their payrolls over the next six months. In addition, only \r\none in four plans an increase in capital expenditures during the \r\nnext half year.\nThe outlook for prices remains inflationary. Better than three out \r\nof five respondents, unchanged from .a year ago, expect the upward \r\ntrend for prices to continue for the balance of the year.\nThe expectations of area economists for the second half of 1970 \r\nparallel those of manufacturing executives. The consensus view of \r\nbusiness and bank economists in the Third District, according to a \r\nrecent poll, is that the current downturn in business activity is \r\nbottoming out and that by fall the economy will be expanding once \r\nmore. Prices, say regional economists, will continue their upward \r\nclimb, but at a modestly reduced rate as the year progresses.\nComments on the current scene by members of the board of directors \r\nare varied. Two members, a banker and a utilities executive, \r\nindicate that sentiment among their associates has become rather \r\ngloomy in recent weeks. The gloom stems from the view that the \r\ncurrent dip in the economy will develop into an all-out recession. \r\nAnother cause of this gloom is the feeling that inflation cannot be \r\nstopped without a serious recession.\nTwo industrialists on the board, however, do not share this \r\npessimistic sentiment. One indicated that he saw some further \r\nslowing in the pace of business activity, but believed that a \r\nrecession would be avoided largely because of a pickup in consumer \r\nspending. The other industrialist expected no further declines in \r\nthe volume of business. He indicated, though, that he was less \r\ncertain about the economy and more confused now than at anytime in \r\nhis experience. Further, this industrialist is skeptical about the \r\nability of current policy to make much headway against inflation.\nAll board members expressed concern over declines in the stock \r\nmarket. Some pointed to the gloomy psychology it is creating; others \r\nare concerned by the possibility of financial failures; still others \r\nare concerned that a market decline of current magnitudes might \r\nfurther undermine consumer spending. In a related point, one board \r\nmember expressed serious concern over the taut liquidity positions \r\nof many corporations.\nBasically, the business opinion in the Third District reflects the \r\nview that the economy has slowed more than expected several months \r\nback, and at best only modest reductions in the rate of inflation \r\ncan be expected by the end of 1970. Also, there is much concern \r\nabout developments in the financial sector.\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/1970/1970-05-su

"Beige Book: National Summary\nMay 20, 1970\nThis initial report of economic conditions in the 12 Federal Reserve \r\nDistricts is based on information gathered from directors of the \r\nReserve Banks, conversations with local bankers, businessmen and \r\neconomists, regular monthly surveys of manufacturing and trade \r\nindustries conducted by some of the Reserve Banks, and selected \r\nstatistical measures of regional economic activity.\nReports from the Reserve Banks clearly indicate that the current \r\noverriding domestic concern is inflation. Businessmen contacted \r\ngenerally expect that prices will continue to increase at a rapid \r\nrate during the remainder of the year. There appears to be \r\nconsiderable skepticism regarding the ability of economic \r\nstabilization policies to achieve a significant reduction in the \r\nrate of inflation without generating an intolerable level of \r\nunemployment or a \r\nfull-scale recession. Similarly, there is evidence \r\nof extensive concern about the persistence of strong upward wage \r\npressures, despite some easing in labor markets. The\r\nwage-push \r\nproblem is particularly acute in the construction industries. Some \r\nof the other major factors that are contributing to an underlying \r\ntone of pessimism regarding the business situation are prospects for \r\na continued squeeze on corporate profits, concern about the tight \r\nliquidity position of some firms, the recent decline in the stock \r\nmarket, and domestic social unrest.\nThere appears to be no consensus as to whether the economy is \r\nactually in a recession\u2014or when the floor of the current slowdown \r\nwill be realized. Views range from expectations of a further and \r\ndeeper deterioration in real economic activity to beliefs that \r\nrecovery is already in progress. The trucking strikes and lockouts \r\nhave seriously disrupted business conditions in some areas, \r\nparticularly in the Midwest. Several Districts noted that \r\nconstruction projects have been impeded because of steel shortages, \r\nand also because of widespread strikes in the building trades \r\nunions. There are also signs that some firms are postponing or \r\nstretching out capital spending projects where feasible.\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/1970/1970-05-ny

"Beige Book Report: New York\nMay 20, 1970\nIn the Second Federal Reserve District, the Boards of Directors at \r\nthe head office and at the Buffalo branch were solicited for their \r\nown and others' opinions regarding current economic conditions and \r\nthe near-term outlook. In the summary, the responses showed \r\nsubstantial agreement concerning (1) a tendency for capital \r\nexpenditures to be stretched out, where feasible; (2) no decline in \r\ninflationary expectations; and (3) an easing of the labor market in \r\ncertain categories, but continued strong upward wage pressures.\nSome businessmen reportedly are deferring or stretching out capital \r\nspending plans where this is feasible. Apparently there is a growing \r\nuneasiness about existing capital spending plans. One machine tool \r\nmanufacturer with a fairly large national business has recently \r\nsuffered a decline of more than\none-third in new orders. Spending \r\nplans that are being completed as originally contemplated include \r\nthose where the firms have \"no choice\"; namely, programs that are \r\nalready in process, particularly if these have long lead times, and \r\nprograms that are connected with pollution control. In western New \r\nYork, for instance, 65-70 percent of the current capital spending by \r\nthe food processing industry is government mandated under air and \r\nwater pollution programs.\nMost of the directors expressed the belief that businessmen were \r\neither as concerned about inflation as they had been, or \r\nincreasingly so. One director noted a growing fear and puzzlement \r\nover whether the Federal Reserve System and the Administration \"mean \r\nbusiness\" in the fight against inflation. Another director observed \r\nthat industry fears wage and price controls and has consequently \r\nraised its profit margins.\nAs for consumer psychology, several directors indicated that \r\nconsumers seemed to expect inflation to continue. There was a \r\ndifference of opinion as to whether this worried consumers or \r\nwhether it had been accepted as a way of life. At the same time, \r\nalmost all of the directors who commented on consumer psychology saw \r\nevidences of conservatism in consumer spending. One director \r\nsuggested that recent stock market developments could be expected to \r\nhave a significant psychological effect on such spending.\nThere was general agreement that businessmen are more concerned \r\nabout the expected continuation of inflation than they are about a \r\nrecession. There were varying opinions about when the \"floor of the \r\nvalley\" would be reached, but apparently most directors did not \r\nthink the slowdown would be very deep. A few of the directors noted \r\nthat industry's principal concern has to do with the squeeze on \r\nprofits, since increasing costs cannot be easily passed on in a \r\nsluggish period.\nConditions in the labor market are very uneven, to judge from the \r\ndirectors' remarks. Some directors noted that it had become more \r\ndifficult for college graduates to find jobs in certain categories; \r\ne.g., as engineers and physicists. Moreover, unskilled help is \r\napparently in easy supply. However, qualified skilled labor \r\ncontinues to be tight. Particular note of this was made with regard \r\nto the Buffalo and Rochester areas.\nSome of the directors observed that despite the easing in some labor \r\nmarkets, there was no detectable easing of upward wage pressures. \r\nSpecial comment was made regarding the steep demands by the building \r\ntrades unions in the Rochester area. These reportedly stem from the \r\nvery generous settlements obtained last year by the same trades in \r\nthe Buffalo area. Note was made of wage increases granted by some \r\nbusinessmen in their lowest paying job categories.\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/1970/1970-05-sl

"Beige Book Report: St Louis\nMay 20, 1970\nA select group of knowledgeable persons in the Eighth Federal \r\nReserve District, including directors at the head office and \r\nLouisville branch of the St. Louis Reserve Bank, officials of larger \r\nbusiness firms and newspaper financial editors, was questioned with \r\nrespect to their views concerning the economic outlook. Their \r\ncomments point to some further decline in business activity in the \r\nnear future, with an occasional expression of doubt as to the extent \r\nof recovery of business profits in the longer run.\nOf greatest concern at the moment for most firms are the contracts \r\nwhich are being negotiated with labor unions and the anticipated \r\nhigher wage settlements. The business representatives almost \r\nunanimously indicate that they will be unable to pass on all of the \r\nrising labor costs to consumers. A continuation of the profit \r\nsqueeze of the first quarter of this year is therefore expected.\nThere are no indications of major layoffs of workers by those \r\ninterviewed, except in the construction industry. Some firms are, \r\nhowever, reducing wage and salary costs by failing to replace \r\nworkers who retire. A slackening in demand for labor is also \r\nindicated by the slowdown in demand for June college graduates. One \r\nbusiness school dean reported a slowdown in growth of both job \r\nopportunities and in starting salaries compared with other recent \r\nyears.\nExcluding stockbrokers, pessimism appears greatest in the \r\nautomobile, chemical, construction, and defense industries in the \r\nEighth District. Concern for their profit outlook in the immediate \r\nfuture and to a less extent in the longer run indicates some decline \r\nin demand for investment funds in these industries. A number of \r\nsmaller industries which are associated with residential \r\nconstruction, notably furniture and fixtures, likewise view the \r\noutlook with little optimism. The breweries, food, and feed \r\nindustries have apparently been little affected by the current \r\neconomic slowdown and have made little change in their long-run \r\nspending plans. One representative of these industries remarked that \r\nhis company was \"looking across the valley\" to a recovery later in \r\nthe year.\nGreat concern was expressed by a number of people for the major \r\ndownward movement in the stock market. Several accredited this \r\nmovement to restrictive monetary policies, which they believe were \r\nnecessary to bring the rate of inflation down to a more moderate \r\nlevel. In some responses, and especially in the case of our own \r\nboard members, a need for continued moderation in the rate of growth \r\nin the stock of money was indicated despite the problems involved in \r\nreducing demand to more sustainable levels.\nFarm land prices apparently continue to decline in the predominantly \r\nagricultural areas of the Eighth District. Estimates of price \r\ndeclines during the first year run as high as $50 to $100 per acre \r\non land that previously sold for $500 to $1,000 per acre.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"