Beige Book Report: Kansas City
December 9, 1970
The economy of the Tenth District continues to show signs of only sluggish growth, according to recent observations of bank directors and businessmen. Many feel that a modest revival of business activity is likely to occur during the first half of the coming year. In a survey of the larger retail stores in the Tenth District, retail sales during the current holiday season were said to be running about the same or slightly better than a year ago. Consumers were reportedly remaining cautious in their buying behavior and demonstrating a high degree of price awareness. Retailers generally expected only a modest rise in their sales volume over the next few months.
In the majority of the retail stores surveyed in the District, retail sales were about at the same level recently as a year ago. Only in the Colorado area, where business activity has been less affected by the current slowdown, were sales reported to be well above year-ago levels. Throughout the District, sales of home furnishings, television sets, and other "big ticket" items were not doing well, although exceptions occurred whenever these items were promoted on the basis of attractive prices. Those products reportedly moving well were the traditional Christmas gift items, such as small electrical appliances, women's sportswear and accessories, and men's furnishings.
All retailers surveyed indicated that consumers were being very price conscious in their buying behavior. While still demanding quality, consumers appeared to be very responsive to price promotional ads, and were shifting their purchases from higher to lower priced items. Reflecting this shift, "budget" store sales have been markedly above year ago levels. In addition, many retailers indicated that with price competition being keener lately, retail prices appeared to be rising at a somewhat slower rate than previously. One further indication both of consumer and retailer price consciousness was the admission by some respondents of resort to deeper price markdowns than was the case a year earlier.
Most of the retailers contacted expected a modest rise in the volume of retail sales in the first quarter of 1971 relative to a year earlier. In the Colorado area, where retail sales have been stronger recently than elsewhere in the District, respondents were more optimistic in terms of the outlook. In this area, expected first quarter gains relative to a year earlier were in the range of 4 to 5 per cent. In other areas of the District which have been harder hit by the economic slump, retail sales are expected to show little or no gain over the next few months. In fact, the general tenor of most of the views expressed about the near-term outlook for retail sales could best be summarized as being cautiously and guardedly optimistic.
Reflecting these cautious views about consumer buying intentions, many directors and businessmen expect the District economy to remain somewhat sluggish throughout the upcoming winter months. A moderate pick-up in District business activity is then expected in the second quarter. A director who is active in the construction industry indicated that while his firm expected a slow first quarter, orders already on his firm's books portended good activity throughout the remainder of 1971. A director representing a major farm implement manufacturing company reported that while current sales have slowed down from last year's level, his dealers are optimistic about sales for the near future. The view that general business activity would pick up moderately in the spring also was supported by a representative of a major airline company who indicated that his company was projecting good growth in revenue traffic miles for 1971 as a whole.