Beige Book Report: Philadelphia
September 9, 1970
Confusion is the most prevalent mood in the Third District. On the one hand, bankers, businessmen, and directors hear optimistic pronouncements from economists and Government officials that the economy is poised for an upturn and that inflation is waning. On the other hand, from their own vantage point, they foresee a sluggish consumer, further cutbacks in plant and equipment outlays, rising unemployment, and wage demands that are intensifying rather than abating.
Large merchants in the Philadelphia area remain pessimistic about sales. Despite talk from economists that a resurgence in consumer spending is near, regional retailers remain unconvinced. They plan further cutbacks in inventories and are holding new orders to a minimum. Retailers expect Christmas sales to be off considerably. One large department store has hired no one for several months, eliminating all overtime, and plans much smaller payrolls than usual for the holiday season.
Reports from manufacturers are bearish as well. Demand in the paper industry is at a low for the year, according to one director. Earlier forecasts of an autumn recovery have been delayed until 1971. The same is true for the clothing industry in the District. Elsewhere in manufacturing, the general feeling is that demand will remain soft. There is near unanimity in the view that capital expenditure plans will be trimmed further and that outlays for 1971 will show no increase from 1970.
Despite prospects of rising unemployment, businessmen believe that large wage settlements will continue to push prices up. In addition, there is concern that the corn blight eliminates the hope of sustained relief from rising food prices. So there is very little acceptance of the view that the fight against inflation is about to be won or that it is even going particularly well.
In a more general vein, several directors expressed the opinion that there is too much "grasping at straws" in the optimistic interpretation of recent economic data by Government spokesmen. Demand statistics are not as bullish and price data are not as encouraging as portrayed, say some board members.