Second District directors and other business leaders who were contacted recently, in general, felt that the recent change in the Administration would have a favorable, if only mild, effect on the business outlook. The respondents, however, were less than sanguine regarding the probable effectiveness of the Council on Wage and Price Stability in curbing inflation. There were reports of easing shortages in a number of lines, alongside continued tight supply conditions in other lines. Excessive inventories were reported to be becoming a problem for some firms, especially in the retail field. The residential construction picture in the District remains bleak.

The respondents in general looked for little immediate change in the fundamental economic outlook as a result of the recent change in Administrations. The reaction, however, on the whole was favorable. For example, a senior official of a large upstate hank felt that the Government would now be able to give fuller attention to economic problems. Similarly, the president of a large nationwide department store chain noted that the new President had already indicated that economic problems would receive his prompt attention and that the present cooperative atmosphere between the Administration and the Congress could lead to substantial progress as far as the business outlook is concerned. In his view, the President's decision to call the economic "summit conference" was a positive first step.

Most respondents expressing a view on the subject, however, felt that the new Council on Wage and Price Stability would be relatively ineffective in holding down inflation. The respondents in general were opposed to the reimposition of wage and price controls. In this context, the president of a multinational firm expressed the belief that firm guidelines for wages and prices tend to become "floors" and interfere with the proper operation of the economy.

Views were mixed regarding the impact on current pricing policies of fears of a return to jawboning or price controls, but the majority of the respondents expressed the view that such fears were not a major factor in firms' pricing decisions. Most of the Buffalo branch directors thus felt that competition prevented such practices. Similarly, the president of a large retail chain reported that his firm's pricing decisions were only based on traditional considerations such as costs and the competitive environment, and the president of a non-ferrous metal concern stated that pricing behavior in the metals industry reflected supply and demand conditions and not fears of a return to jawboning or price controls. The senior official of a large upstate manufacturing firm, however, thought that fears of price controls had influenced businessmen who wanted to "get ahead of the game" before controls were reinstated, and a similar view was expressed by a New Jersey banker.

Regarding shortages of materials, there were a number of reports of easing in certain lines, but of a continuing tight supply picture in others. The retailer mentioned above thus reported signs of an easing in several areas of his firm's business, notably textiles. Most of the Buffalo branch directors reported some easing of shortages, as did a number of other respondents. A senior official of a multinational petroleum concern reported that petroleum was no longer in short supply, but that a possible coal strike this fall could increase oil demand. He also reported a shortage of drilling equipment. Other respondents mentioned continued shortages of chemicals, steel, alcohol, paper boxes, and certain replacement parts.

Regarding the inventory picture, the respondents on balance felt that the buildup of inventories has begun to become a problem in some lines. Among others, the president of the large department store chain mentioned above reported that inventories were building up at the retail level as well as at the wholesale level and, in some instances such as big-ticket appliances, at the manufacturing level. An upstate retailer also stated that high inventories have become a problem in the retail line. The president of a non-ferrous metal firm noted that while stocks of metals are still very low, inventories of some metal products are building up. Another observer indicated that stockpiling of raw materials and work-in-process items had been attractive when expected cost increases were much greater than carrying costs, but that the situation was now reversing.

Residential construction in the District, particularly in the New York City metropolitan area, remains very weak. Thrift institutions have suffered a massive outflow of funds and in many cases are granting no new mortgage commitments or are requiring large downpayments and other stiff terms. One large New York City savings bank, for example, is granting mortgage loans only to depositors of two years' standing, requiring that at least $5,000 be maintained in the account from the time the application is received to the closing of the loan, and stipulating that the rate be renegotiated every five years.