August 9, 1972
There have been no important changes in current and prospective conditions in the Sixth District from those reported a month ago. However, a special survey of a cross-section of prominent businessmen located in the Atlanta, Nashville, and New Orleans areas yielded the following conclusions: support for the NEP remains strong, but has diminished somewhat over the past year; the NEP has been effective in checking at least some price increases; wage inflation has been effectively checked by the NEP, inequities have not been so great as to jeopardize the program; some form of controls should be continued beyond April 1973; inflationary expectations have diminished slightly; and the only economic resource that is in short supply is competent labor.
General economic activity remains very strong in most areas of the District. Construction is mixed. Residential construction activity has stabilized or diminished slightly, although it still remains at high levels. The pace of new plant and plant expansions has been stable.
Most survey respondents thought that the NEP has been effective in reducing the pace of inflation. Several respondents mentioned that prices of their products and prices of some of their suppliers have been held down. The NEP was claimed to be responsible for holding down price increases on the following goods and services: construction, raw materials, autos and appliances, services supplied by Stevedore companies, steel, telecommunication products, and plastics.
The respondents were nearly unanimous in their opinion that wage controls have been effective in scaling down the rate of wage inflation. This has evidently been particularly true in the case of office and service workers.
Respondents did not complain seriously of inequities in the NEP, although many were cited, and one respondent said that the longer the program is continued, the greater the inequities will become. Several respondents thought that office workers and executives were bearing the brunt of the program, while union workers were gaining. One soft drink bottler and one retailer complained about not being able to pass on increased costs of glass bottles and merchandise. Another respondent complained that there were so many interpretations, exceptions, changes, and reports that the program was incomprehensible and burdensome. One respondent said that profit restrictions were inequitable and that they were discouraging efficiency.
Only one respondent felt that the controls should be abolished immediately. Most felt controls were a necessary evil that should continue as long as necessary. The Federal deficit and the forthcoming period of heavy labor contract negotiations were mentioned as reasons for continuing controls beyond April 1973. Several thought that controls should be put on a standby basis after April 1973.
The only shortage that has resulted from the economic expansion so far is competent labor. Almost half the respondents specifically mentioned difficulty in finding competent clerical and skilled labor. One respondent mentioned a shortage of plastic materials, and another expected credit to tighten up in supply next year. However, the respondents evidently foresee no critical supply bottlenecks in the near future.
Although there was no strong consensus, it was judged that the inflationary expectations of those surveyed have diminished slightly. Several thought that inflation would diminish in the remainder of 1972 and in 1973.
One thought that built-in wage increases would cause prices to rise more next year. Another respondent said his price outlook would depend on the size of the federal budget deficit.