A moderately more optimistic picture of the economic outlook, as compared to last month, emerged from opinions expressed by the directors of the New York Bank and the Buffalo branch, and other businessmen. Consumer spending appears to have strengthened somewhat, while business confidence was reported to have improved moderately. The unemployment situation continues unsatisfactory, but is apparently a little better than earlier in the year.

Consumer spending, which for the retail industry as a whole had been relatively sluggish in February, seems to have quickened in the very recent past, with scattered indications of increased sales of higher priced items. Among the directors, a senior official of the largest upstate firm felt that the underlying trend of consumer spending has continued to improve, and saw evidence of increased consumer willingness to trade-up in the strong sales of his firm's new movie cameras. A head-office director referred to an across-the-board rise in airline travel and to a "dramatic" increase in domestic television sets sales, while another director, an upstate businessman, noted that, in his area, sales of higher priced automobiles were rising more rapidly than those of cheaper models. Nevertheless, most of the directors at both the head office and the Buffalo branch, did not discern any fundamental changes in consumers' attitudes as yet. Among the retailers contacted, an official of a high-price and high-quality New York City department store with branches in the suburbs reported that, following a rather sluggish performance earlier in the year, sales by his firm had picked up noticeably so far in March, and while he remained cautious, he felt that 1972 would be a good year for his firm. Similarly, the vice-president of a large nationwide chain of department stores reported a strengthening in consumer demand at his firm's stores in the recent past and, notwithstanding the rather slow start earlier this year, looked for a significantly better retail sales performance in 1972 as compared to 1971-both for his firm and the retail trade industry in general. Finally, an official of a medium-price retail store chain, which has experienced a gradual increase in business since last fall, stated that he expects this trend to continue and noted that in the past month there had been a significant increase in his firm's sale of big-ticket items such as furniture and home appliances.

Also encouraging was a report of some firming in business confidence. Among the Buffalo branch directors, the president of a Rochester bank traced this strengthening to the "slightly better" profit outlook, while the chairman of the board of a Buffalo bank felt that the recent stock market strength mirrored an improved mood; he also reported some pickup in machine tool orders in recent months. In addition, another upstate banker pointed to the relatively "ambitious" capital spending plans in his area, while a senior official of a food processing company pointed to a recent sharp rise in farmers' borrowings from agricultural financial institutions which he felt reflected a significant increase in farmers' capital spending. Among the head-office directors: the chairman of a large New York City bank stated that there had been "some general improvement" in business confidence, an upstate banker saw signs of willingness to spend on plant and equipment, while a New Jersey and an upstate New York banker both felt there had been a modest improvement in business confidence in their areas. However, at a meeting of business leaders held at this Bank, a senior official of a large nationwide conglomerate stated that while he looked for a rise in capital spending in certain industries, other sectors such as the space and aircraft industries would not likely increase such outlays. He also noted that most manufacturers are "a bit wary" and more reluctant than in the mid-1960s to embark upon large-scale capital outlays. As in previous months, some businessmen felt that most of the capital outlays would be largely limited to environmental control purposes.

There was some evidence at this time of an upturn in inventory outlays. The president of a large metal processing corporation reported some inventory buildup in the metal industry, but primarily as a hedge against expected price increases in copper. Another director referred to a rebuilding of inventories in computer related lines. The retailers that were contacted, however, all reported that while their firms were increasing inventories somewhat in view of their expectations of increased sales, such outlays were being kept under tight control. The current inventory outlook was perhaps best summed up at the Buffalo branch directors' meeting where it was noted that businesses had "learned to live" with lower inventories, and are becoming less concerned about the occurrence of "stock-outs".

Although the respondents saw no dramatic changes in labor market conditions over the past month, there were no further reports of cost-cutting layoffs and in fact several respondents saw some strengthening in the demand for labor, particularly skilled workers. Some improvement thus was noted in the Rochester area, while a senior official of the largest upstate firm observed that unemployment rates for experienced workers were trending down. The New Jersey banker stated that there had been a "fair" improvement in the job market in his area, and that it was harder to get qualified workers. A similar sentiment regarding skilled workers had also been expressed by a senior official of the country's largest communication firm. Finally a director reported that his company's efforts to improve productivity through reductions in production workers had been ''somewhat overdone'' and that his firm was now increasing its work force by a few hundred workers. On the other hand, a number of respondents looked for little change in the unemployment picture in the near future. The official of the large manufacturing conglomerate did not expect a quick rebound in manufacturing employment, while the chairman of a large department store chain expressed the belief that unemployment benefits and high welfare payments are “geared to keep the unemployment rate high”.