Beige Book Report: Philadelphia
October 14, 1970
Reports from businessmen in the Third District suggest: (1) Consumer spending is likely to remain a passive element in the business outlook into 1971; (2) Capital expenditures will be a major drag on economic recovery; and (3) The unemployment rate is likely to move up still further.
The performance of consumers remains lackluster in the Philadelphia area. For three of the last four months, sales volume in large department stores has been below a year ago. Only substantial markdowns in prices, as occurred in September, for example, seem to stimulate buyers, according to area retailers. Most of the large retailers indicate they would be happy just to repeat last year's Christmas volume. Many admit they would not be surprised, however, to see sales fall below last year's pace during the closing months of 1970. Looking ahead to 1971, few retailers expect a rejuvenated consumer before spring.
A large majority of regional manufacturers polled in early October indicate they will either cut back or not increase capital spending during the next six months. New orders have been disappointing and order backlogs are still headed downward. Although most manufacturers do expect a pick up in the overall economy in the months ahead, they intend, for the most part, to keep a lid on capital outlays until the outlook is more optimistic for their own firms. In the same cautious vein, few manufacturers plan to increase inventories during the coming months. On the employment front, nine out of ten manufacturers plan no increase in the number of employees through November. At the retail level, area department stores say the beginning of the normal seasonal buildup of Christmas employees will be delayed about a week. Further, total seasonal increases will be somewhat under a year ago. All in all, particularly with an expanding labor force, the rate of unemployment will probably continue to rise in the Third District.