Beige Book Report: New York
January 15, 1975
Views expressed by Second District directors, retailers, and other business leaders who were contacted recently point to a further slowing in business activity over the past month. Retail sales in general have been sluggish, although strengthening somewhat recently; inventories are at, or approaching, excessive levels; and unemployment is on the rise. At the same time, there has been no lessening of liquidity pressures.
Retail sales over the holiday season were on the weak side but in many cases no worse than the relatively pessimistic expectations. A survey of the seven leading New York City department stores by a local newspaper revealed that, in dollar terms, December sales by these stores within the City had been slightly below those of December of 1973, implying a significant decline in physical volume. Sales of major appliances and other durable goods in general were particularly weak. Dollar sales at those stores' suburban branches, however, were slightly above last year's. The president of a large Rochester department store reported sales by his firm to be in line with his expectations that they would run at about the same level as a year ago in dollar terms. Similarly, a senior official of a large department store chain reported that dollar sales at the firm's western New York affiliates in November and December were about equal to those of the year earlier period, but that physical volume was about 4 percent lower than during November-December 1973.
The retail sales picture appears to have brightened somewhat in recent weeks, however, in response to both pre-Christmas and the usual post-holiday sales. Thus, the president of a nationwide retail firm stated that business during most of the Christmas buying season ran significantly below expectations, but that as a result of heavy promotional activities the season had ended on a strong note, with good traffic continuing after Christmas. A senior official of a large New York City department store similarly reported that after a slow start, business had been brisk in the final days of the holiday season, a development also reported by several other retailers. Among others, the president of another large New York department store with branches in the suburbs stated that Christmas sales had been up to his expectations and that so far his firm's January sales had been "producing business" and were heavier than in January 1973.
In the view of several respondents, the reduction in consumer demand and the accompanying more competitive selling practices have been reflected in some evidence of downward pressures on prices of finished goods. One retailer stated that price reductions for various items were legion within the retail industry, generally due to overproduction by manufacturers of dry goods, appliances and similar items, and to the desire to reduce inventories. The respondents, however, did not regard the decline in a number of raw material prices as having as yet had a significant influence on the price of finished goods.
Regarding inventory positions, the president of the nationwide retail firm mentioned above reported that his firm had been overstocked for several months and was making major efforts to get its inventories into line with consumer demand. A senior official of a multinational chemical concern stated that while inventories had not yet built to excessive levels, he expected increases during the first half of 1975. The chairman of a large New York City bank looked for inventories to rise sharply in response to falling sales. Several other respondents, however, felt that inventories remained at an acceptable level.
The District unemployment situation deteriorated further during the past month, particularly in the New York City area and in Buffalo. The November jobless rate in New York State rose to 6.6 percent, and to 7.4 percent in New York City. December figures are expected to show a substantial further rise. There have been frequent reports of layoffs by major firms in various parts of the District, and in recent weeks new claims for unemployment insurance benefits in New York State have been among the highest in the nation. However, the majority of the respondents commenting on the subject as yet discerned little or no easing of the shortage of skilled workers or of highly qualified managerial employees. Some respondents, however, did see, or expected to see shortly, some easing in the situation.
Regarding liquidity positions, none of the respondents reported any signs of easing in pressures thus far. On the contrary, the majority of the Buffalo directors felt that conditions were worsening. Several of these directors noted that in view of the unattractiveness of the bond and equity markets and the lack of access to national money markets generally, many businesses in their area were seeking commercial bank loans for working capital or to, at least temporarily, finance capital expansion. Others cited the substantial increase in delinquencies on accounts receivables, and the increase in the number of bankruptcies.