Second District directors and other business leaders who were contacted recently in general reported that they were taking a dimmer view of the economic outlook than last month and did not expect a pickup in business activity until mid-1975. The retail sales picture continues sluggish, particularly with respect to auto sales. Construction remains in the doldrums, with little improvement expected over the next six months. The District unemployment rate has been running at about the national level but substantially higher in New York City. There were scattered reports of a lessening of upward pressure on prices and of actual declines in some materials prices.

Most of the respondents reported that their outlook for the economy had worsened over the past month. Among others, the Buffalo Branch directors expressed the feeling that the current slowdown in business activity was likely to be more pronounced and of longer duration than had been previously anticipated. The president of a large chemical concern stated that he believed the outlook for the economy was for a general weakening amidst "a feeling of gloom," and the chairman of a large New York City bank reported that his estimates of the strength of the economy had moved lower over the past month and felt that inventory liquidation would have a depressing effect. The president of a multinational nonferrous metal producer expected the economy to remain flat until the middle of next year, when a slower upturn would occur. Similar sentiments were expressed by a number of other respondents.

The District retail sales picture continues sluggish. A number of respondents felt that new automobile sales would be at least 5 percent lower in 1975 than in 1974 and that the demand for other durable goods had also weakened. These respondents felt that while the demand for non-durable goods might be stronger, the overall retail sales picture was not likely to show significant improvement over the next six months. Against this background, retailers have been intensifying their promotional efforts with increased advertisements and special sales. The extent of the success of these efforts, however, remains to be seen.

Regarding residential construction, the majority of the respondents felt that the recent drop in interest rates would have no significant impact on housing starts over the next few months, while several respondents felt that rates would have to move significantly lower before residential construction picked up. The Buffalo directors, although feeling that the decline in housing starts appears to have bottomed out, cited the higher cost of construction as a major deterrent to an upturn in construction activity in the immediate future. The New York City banker mentioned above stated that an oversupply in housing was an even more important factor than the high level of interest rates in inhibiting construction activity. A senior official of a New York City based thrift institution association reported that, following a further sizable outflow of funds from District mutual savings banks in September, such outflow appears to have tapered off in October. For the time being, however, he felt that any possible increase in deposits at these institutions would first be reflected in repayments of loans from commercial banks rather than in new mortgage commitments.

Unemployment in New York State as a whole has been running at about the same level as nationwide. However, the jobless rate for New York City has been substantially higher, amounting to 7.4 percent in September.

A number of respondents reported that as a result of the sluggish economy, wholesale prices for a number of raw materials have dropped and that lead times for orders of many items have been shortened. These respondents expected that this will result in some reduction in finished product prices as well as in the liquidation of inventories built up in anticipation of increased shortages and rising prices. So far, however, there appears to be little evidence of discounting from list prices, although there are indications of a shift toward a buyer's market for a number of products, with future price concessions a real possibility.