Beige Book Report: New York
November 11, 1970
A somewhat more pessimistic picture of the current and prospective economic outlook than had been painted a month ago emerged from the opinions expressed recently by Federal Reserve Bank Directors and other business leaders. Most feel that, in part as a result of the General Motors strike, a revival of economic activity will be delayed longer than had previously been expected. In their view, prospects were for further trimming of planned capital outlays, continued restrained consumer demand over the next few months, sustained upward pressures on wages and prices, a further squeeze on profits, and little, if any, progress toward curbing inflation.
The chairman of the board of a large New York City bank thus commented that overall economic activity had slowed, and emphasized the significant actual and prospective adverse effects on the economy of the General Motors strike. The president of a Rochester department store pointed to the unusually high rate of unemployment in his area, to the temporary closing down of eight or ten companies dependent on the auto industry, and felt very concerned and pessimistic over the current outlook. The president of a large life insurance company believed 1971 would witness only a "slow ascent," while a partner in a large brokerage firm offering a wide variety of financial services did not see any significant upswing in the next year and if there is, a recurrence of the inflation problem. The president of a large chemical firm reported that he had been quite sanguine over his firm's prospects prior to the General Motors strike, but was now more pessimistic. The former chairman of the board of a major oil company foresaw a stagnant first half of 1971, but some real improvement for the full year.
With respect to planned capital outlays, the chairman of the large New York City bank expressed the view that these plans are being revised downward. A director reported some "holding back" in capital expenditures in the industries with which he is familiar—aerospace, electronic, glass and communications. The president of the Rochester department store saw evidence of cutbacks in his area, while the president of the large chemical corporation reported that his firm was trying to hold down such outlays; he estimated that his firm's capital outlays will be about the same in 1971 as in 1970, which will be a bit less than in 1969. The president of a large life insurance company and one of the partners in a large brokerage house both felt that corporations with whom their organizations had contacts were reducing original capital spending plans. The editor-in-chief of a large publishing and communication corporation felt there might be "a substantial decline from this year's level" and the president of a manufacturing firm reported cuts in his firm's plans, estimating its 1971 capital outlays as not in excess of, and perhaps even below, those of 1970.
Regarding consumer demand, Rochester retail business was reported as "terrible." The president of a large chain of diversified department stores saw no real bounce" as yet in retail sales, but felt a "faint heartbeat." There has been some improvement lately in ready-to-wear women's clothes as the indecision regarding the fashion styles is being resolved. However, men's suits were meeting a great deal of price resistance at the $100 level. Home furnishing, television sets and other "big ticket" items were moving slowly. He did expect Christmas sales to be at about last year's level, and does not anticipate any real pickup in sales before the second quarter of 1971. The General Motors strike so far has had little adverse effect on this firm's Second District stores, but has had an impact on its stores in the middle west and the east coast of Florida.
Most of the directors and business leaders expressed concern over the large wage increases already granted, and looked for no lessening of wage demands by union and non-union workers. With respect to the latter, the feeling was summed up by the president of an upstate bank who pointed out that non-union labor reads about raises granted union workers and they do not want to be behind. Against this background, most directors and business leaders did not think that the outlook for ultimate success in controlling inflation had improved.