April 14, 1976
The Teamsters' negotiations apparently were settled with only minor, temporary walkouts in this District, and these were largely confined to the Detroit area. The cost of the Teamsters' 3-year package is difficult to evaluate. A Detroit union official calls the contract "the best we ever got," and says many over-the-road drivers paid by the mile could get $10,400 more per year at the end of 3 years, boosting some into the $30,000 to $35,000 range. This 40 to 50 percent boost assumes a 6 percent per year rise in the CPI under the new unlimited COLA. Without COLA increase, the 3-year contract is said to call for a 33 percent rise in costs, with large boost for pension contributions as required by the new law.
Some knowledgeable analysts in the District are very concerned about a serious rubber industry strike starting next week. For the first time, three or four of the largest producers may be struck simultaneously. The various issues, including a COLA, may not be resolved without a walkout that might last 60 days. Output of autos and trucks probably would be affected in 30 to 40 days as stocks of tires are limited. Many other essential industrial products would be cut off by a rubber strike. Unlike the Teamsters' settlement, the rubber contract eventually decided upon is likely to set a pattern. The main issues in the UAW contracts coming up this fall are not clear, but General Motors has suggested reevaluation of the company-paid medical-dental program which now costs $150 per worker per month and is rising rapidly even without further liberalization of benefits. Chicago lithographers recently agreed to forego a scheduled wage boost in order to slow the migration of printing and graphic arts, but such reports are unusual. Chicago teachers reluctantly agreed to an 8.5 percent salary cut to be achieved by shortening the current school year.
Virtually all consumer hard goods, especially autos and most appliances, are selling well again. Sales gains at general merchandise stores for March are very impressive in view of the much later date of Easter this year. General merchandisers are pleased with the improvement in their profit margins, which reflect lower carrying costs of inventories as well as higher volume. Food retailers, however, are having a difficult time maintaining their profit margins in the face of rising costs of labor, transportation, fuel, insurance and other overhead. Increases in these expenses also plague private schools, hospitals, and other institutions.
The increase in sales of autos and light to lower-medium weight trucks has exceeded the hopes of most industry analysts. Inventories of popular models are inadequate to meet sales potential. The increase in sales has been concentrated in the compact and intermediate-sized with the subcompacts and standards losing ground relatively. Better gas mileage on domestic models and relatively improved price relationships have helped reduce the market penetration of imports. Sales of larger trucks have remained at a very depressed level, but output is being expanded to meet an expected rise in demand coming about midyear as truck freight continues to increase.
Purchasing agents' reports for both Chicago and Milwaukee were very promising for March with significant gains in new orders, output and, most recently, employment. More firms are reporting increases in order backlogs, and many are beginning to rebuild inventories of purchased materials and components. Producers of basic materials such as steel and cement are boosting forecasts of output for the year. Steel imports are at a lower rate than most observers had expected, perhaps because foreign producers are reluctant to match U. S. prices.
Manufacturers of capital goods components report continued improvement in orders for such products as controls and motors. Partly this reflects "bare bones" inventories of distributors. Some utilities indicate they are moving ahead on deferred capital expenditure programs as financial positions have improved and certain regulatory obstacles have been resolved. Announcements of expanded capital expenditure plans in other industries are rare. Capacity is currently ample in most types of manufacturing, transportation, trade, and finance and vacancy rates in commercial buildings are high, both downtown and in the suburbs.
Despite much talk that "the average family can't afford a home any more," transactions have been at a very brisk pace both in preoccupied units and in new housing. Single-family homes are moving at prices 50 percent higher than 5 years ago in good areas. New building is beginning to revive, but mainly in single-family developments and townhouses.