Second District Directors and other business leaders who were contacted recently on balance felt that retail sales were holding up better than had been expected. There continued to be reports of easing shortages in a number of lines along with persisting tight supply conditions in others. The respondents did not think that firms were raising prices because of apprehension of a return to price controls. No significant easing of liquidity pressures was noted.

Regarding consumer spending, the Buffalo Directors generally characterized retail sales, other than automobiles, as being stronger than had been expected, a sentiment shared by an official of a nationwide chain of department stores. An upstate businessman, a Director, felt that although the higher price for 1975 automobile models might have an initial adverse impact on auto sales, if the new models appealed to the public, such sales would return to normal. In this context, a New York City representative of a major auto manufacturer stated that while only a few days had elapsed since his firm's new models had been introduced, dealers were reporting a very favorable public reaction to the design and engineering improvements in the firm's 1975 models.

On a more restrained line, a number of the respondents indicated that although retail sales levels appear to remain high, consumers are bargain hunting to a greater degree than before. And a senior official of a high quality New York City department store with branches in the suburbs reported that his firm had taken a gloomy view early in the year, but had been "pleasantly surprised" until September, since then, his firm's business had turned "soft," particularly with respect to durable goods and big ticket items.

Concerning supply conditions, the president of a multinational chemical firm reported some easing in certain lines of chemicals and in packaging products, while the chairman of a major oil company characterized the supply picture in the petroleum industry as quite strong, with substantially higher inventories of fuel and heating oil. The president of an upstate bank stated that supply conditions in general had eased somewhat, a sentiment expressed by several other respondents. The retailers that were contacted reported some easing in textile products and another observer reported a greater availability of certain lumber products. The Buffalo Directors, however, stated that supply conditions remained tight for critical items used in manufacturing such as stainless steel, zinc, paper products, metal casing and welding rods, and noted that in general delivery times for manufactured goods were much longer than last year. A Director closely associated with New York State agriculture reported that fertilizer and box material remained in tight supply and that rapidly rising prices as yet had not dampened the demand for these products.

Respondents expressing an opinion on the price situation did not think that firms were raising prices because of fears of a return to price controls. Rather, the rapid increase in prices was attributed to higher operating costs and declining profit margins. A senior official of a large multinational firm based upstate stated that business generally recognized that if price controls were reinstated such a move might well be accompanied by mandatory price roll-backs.

Comments regarding the unemployment situation were received before the release of the September unemployment figures. At that time, the respondents attributed the continued relatively strong employment picture in the face of weakness in some other economic indicators primarily to the limited extent of the decline in industrial production and to the strong corporate profit picture, which has induced less layoffs.

Views regarding the impact on liquidity positions of the recent decline in short-term rates were best summed up by the Buffalo Directors. No significant easing of liquidity pressures was noted by these Directors. They generally felt that current short-term rates could be tolerated by large industries but that liquidity pressures continue to be particularly intense for the small businessman. Moreover, while short-term rates may have gone down, there has been little change in
long-term rates, posing problems with respect to long-term financing for industry and municipalities.