The Second District directors and other business leaders contacted recently remained generally optimistic about the prospect for business activity over the foreseeable future. And, the respondents in general felt that the recent devaluation of the dollar would have a favorable impact on the country's economy. However, concern over the balance-of-payments situation remained very much in evidence. Phase III was not expected to modify the rosy corporate profits outlook, but considerable doubt was expressed regarding its workability with respect to wage controls. Evidence of increasing strains on productive capacity were noted, and widespread concern was voiced over prospects for controlling inflation.

Regarding the recent devaluation of the dollar, several bankers did not anticipate that this move would have an immediate effect on their own business but felt that the economy generally would benefit over the longer run as more United States products are sold, both domestically and abroad. A senior official of a large multinational manufacturing firm headquartered in upstate New York predicted that the devaluation would stimulate foreign sales of multinational companies, with an accompanying reduction in the country's international balance of payment deficit later in the year. The vice chairman of a large non-ferrous metal producer stated that the recent foreign exchange moves had been "helpful" to his firm.

Some respondents, on the other hand, were more restrained and others expressed concern over the uncertainties that they felt continued to surround the current international financial situation. The president of a large multinational petroleum producer stated that the devaluation had no major immediate impact on his firm. Similarly, the president of a lead importing corporation felt the devaluation did not "involve" his firm very much. Further, the owner of a large fruit growing concern—a director—stated he did not expect the devaluation to have any effects on the fruit growing business nor on any agricultural lines oriented to domestic consumption. As noted, a number of respondents expressed general concern over the balance of payments picture, citing the need for reform of the international monetary system. A number were especially concerned over the "Japanese situation", with this view most strongly expressed by one respondent who declared that "the Japanese are the heart of the problem.

Turning to the domestic picture, it was the consensus of the Buffalo branch directors that Phase III had not altered the favorable outlook for corporate profits this year. Also, those directors did not expect Phase III to result in any significant shift in plant and equipment spending. They noted the uncertainties created by the new approach, but felt that the elimination of the "red tape" associated with Phase II more than made up for the unfavorable effect of these uncertainties. On the other hand, some respondents were quite dubious regarding the wage side of the control program. An upstate banker, a director, felt that a "double standard" was being used—one for organized labor and a more stringent one for non-union workers. The lead importer mentioned above stated he expected Phase III to "break down" in the area of wages. The non-ferrous metal producer felt the new program had contributed to a seven week strike in his firm's southern facilities inasmuch as the firm had been close to signing a contract when the "Phase III bombshell hit".

With respect to shortages of raw materials and manufactured goods, most comments on specific products focused on shortages of lumber products. In part, these shortages were attributed to the export of wood products as a result of the price control program which, according to the respondents, made such exports more profitable than domestic sales. Also, reduction in wood product supply and rises in production costs were attributed to new ecology standards and to the activities of conservationist organizations. Apart from the wood products industries, however, the directors saw no direct indication of shortages and no evidence of inventory stock piling in anticipation of such shortages. But they felt that higher prices and longer delivery schedules pointed to increasing strains on productive capacity.

Against this background, many respondents expressed alarm over the possibility of a return to surging inflation. Most Directors cited this prospect as one of the major problems they foresaw on the economic and financial horizon. The opinions of other business leaders were perhaps best expressed by the chairman of a large financial institution who commented "everything is tending toward inflation".