October 13, 1971
Some of the overall optimism associated with the President's mid-August announcement seems to have dissipated, as Third District businessmen are somewhat less optimistic about the weeks ahead than they were a month ago. Bankers are looking for little more than a seasonal pattern in loan demand. They expect interest rates to remain stable or possibly edge downward in the coming weeks. Although there was some increase in consumer activity in recent weeks, retailers and bankers are still cautious in their predictions about future strength in the consumer sector.
District manufacturers seem to be slightly less optimistic than they were a month ago. Fewer predict a pickup in the general business climate one month ahead than was the case in September. More are anticipating either unchanged conditions or a decline in business activity. There is less optimism with respect to new orders, shipments, and unfilled orders. Fewer firms plan inventory accumulations than in September, and a smaller number plan to add workers. On the price front, a greater percentage of firms this month are predicting an overall increase in prices than last month.
Area bankers indicate that loan demand has remained soft, although there was spotty activity in the foreign sector, communications, machinery, and foods. One banker noted that pickup in activity at his bank was due primarily to the aggressive efforts of loan officers. In the months ahead, most bankers see more of the same-little more than seasonal patterns. Possible strength may arise in construction and durables. Only one banker predicted a moderate but steady increase in loans. Bankers expect interest rates either to remain stable or drift downward slowly.
Local retailers noted a strong consumer pickup in the last three weeks but were unwilling to translate this into any longer-term trend. Most were still cautious about inventory building. Bankers confirmed the presence of the yet-reluctant consumer, citing that consumer loans were rising very slowly. One banker, who was particularly disappointed with the auto loan picture, said that dealers were caught with large inventories because of unexpected low sales.
The reaction to the preliminary outline of Phase II was mixed. Most bankers and businessmen want to wait for more details before making any judgment about its effectiveness. However, one banker indicated that he felt the plan would be particularly difficult to implement. Another stressed the necessity to crack down hard on violations by large corporations and labor groups. Still another maintained that we cannot get trapped into relying on the controls for any type of long-run solution.