In the view of most of this Bank's directors and other business leaders recently contacted, the new federal revenue sharing program is likely to result in increased state and local government outlays over the near-term, rather than tax reductions. A cease-fire in Vietnam was expected to have little impact on the current business situation, since that outcome was believed to have already been largely discounted. Respondents in general were optimistic over the retail sales outlook for the Christmas season. Business hiring practices remain on the conservative side, with additions to payrolls still geared to current rather than expected future needs.

In the view of most directors, the recently enacted measure providing for substantial federal revenue sharing with state and local authorities could be expected to quickly stimulate increased outlays by these governmental units. Buffalo branch directors felt the measure would have a "bail out" effect, enabling state and local governments to meet demands from organized employee groups and other civic pressure groups. They also reported there were indications a number of localities intended to use part of the payments to undertake capital expenditures that had earlier been deferred for lack of funds. One director felt the measure would have a "substantial" spending impact that would be reinforced by the current strong cyclical rise in local taxes. Although some of the directors did not rule out the possibility that the program would lead initially to some local tax reduction—or a moderation of increases—the general feeling was that the lion's share of the available funds would be used to finance projects that had been postponed earlier due to a lack of funds. On the other hand, one New Jersey banker felt the revenue sharing measure would neither contribute to increased spending nor reduced taxes in the financially pressed cities in his area, but rather that a good deal of the funds would be used to liquidate outstanding debt.

Most of the directors agreed that a cease-fire in Vietnam would have little immediate impact on business and consumer spending, since that eventuality had already been discounted. A few of the directors, however, did feel such a settlement would contribute to an aura of stability by finally eliminating the major uncertainty that has adversely affected business and consumer attitudes over the past several years. The consumer sector was viewed as the area where Vietnam agreement would have its major impact.

Concerning consumer spending, respondents in general continued to express an optimistic outlook. A senior official of a New York City department store, specializing in high-priced, high-quality goods and having branches in the suburbs, reported that his firm's October sales had been "very good" and that he expected a higher level of business during this Christmas season than last year's. The chairman of the board of a Rochester department store, who previously had frequently been rather skeptical over the consumer spending picture, reported that retailers in his area were expecting holiday sales to run well ahead of a year ago. Indeed, he felt that the consumer is likely to spend a larger share of his income in the coming months. The New Jersey banker reported that retailers in his area were looking toward a good Christmas season. The Buffalo branch directors expressed views regarding the consumer spending outlook that, while varying in degree, were unanimously optimistic.

The directors were unable to detect any trend toward more aggressive hiring practices in private industry. It was, however, noted that the earlier "belt tightening" phase had come to an end and that, with the continued upswing in business activity, the need for additional employees was starting to build.