Beige Book Report: New York
September 9, 1970
Opinions were mixed among Federal Reserve bank directors and business leaders regarding current and prospective capital outlays, consumer spending, and the labor situation. In general, the assessment was: no recent cuts in, but careful watching of, capital spending; unchanged or improved consumer attitudes; and a rise in the availability of labor but no curtailment in union wage demands.
The president of an upstate bank saw no evidence of a slowdown in capital spending in his area; he referred to the difficulty recently experienced by his bank in finding a. contractor for the construction of a new branch. A Rochester businessman stated that he had not heard of any plant construction programs being canceled in his locality. He did note, however, that the largest corporation in the city had stopped building vigorously in the area because of labor market conditions and has shifted parts of its operations to Denver, Colorado. A group of business leaders generally indicated that a very careful watch on capital spending was being maintained in their industries and that their efforts were concentrated on modernization, replacement, and pollution control rather than on expansion.
Sentiment with respect to consumer spending was particularly mixed, with some interesting expressions of optimism. One upstate businessman reported that retail merchants in his area were gearing their inventories to expectations of lower volume and did not anticipate a general improvement until the yearend holiday season.
The president of an upstate bank felt that while sales continued to be good, a good deal of the rise in the dollar amount was due to price increases. He noted that lower priced cars were apparently moving well, but that the sale of more expensive cars, as well as luxury items in general, have suffered.
The chairman of a large medium-priced retail chain also felt that the continued rise in dollar volume was largely accounted for by price increases, as well as the opening of new stores. He also indicated that the weakest spots remained in the bigger ticket and higher priced items. However, while he could not point to a change in consumers' buying habits on the basis of currently available "hard" figures, his "gut reaction" was that consumer confidence had improved significantly over the past month as uncertainties over Cambodia, the stock market, and the liquidity situation abated. He expressed a "subjective" inclination to see this change translated into an improved sales picture in the near future.
The president of a large New York City department store was even more optimistic. On the basis of very recent developments, he felt that there had been a "definite turn for the better," and that he looked with confidence for further pick-up in the coming months. He reported a particularly marked increase in the sale of household goods, which he attributed, to a combination of pent-up demand and improved consumer confidence.
With respect to the labor market conditions, both the Rochester businessman and the upstate banker noted an increase in the availability of labor in their area. Notwithstanding the increased availability of labor, the Rochester businessman stated that there had been "no easing whatsoever" in union demands. The chairman of the large retail chain remarked that increased labor costs had made price reductions very difficult.
One director concentrated on the aerospace industry. He noted that 500,000 workers were laid off in that industry in the past year and that another 500,000 might also be laid off by next July. He attributed these difficulties to the tough Government attitude toward defense spending. He said that if Penn Central could go into bankruptcy, it was possible that Lockheed and other aerospace firms might be forced into a similar situation. In his view, the airline industry may be unable to pick up present commitments for new aircraft unless the Government permitted some mergers. He said that airlines needed a high utilization rate to be profitable and that, in some cases, this was only possible through merger. He commented on the tremendous amount of excess capital in the aerospace industry.