Beige Book Report: New York
December 15, 1976
District merchants reported a slowing in the growth of sales in November after two months of strong gains. Nevertheless, retailers generally remained optimistic about December. A vice president of a leading New York City department store termed November sales as rather disappointing but said he expected the Christmas season this year would be "late." Another City retailer agreed that sales were not up to expectations, but he too was hoping for a "substantial Christmas." One department store executive predicted that his company would post a record fourth quarter in sales. In upstate New York as well, there were signs that retail sales slowed toward the latter part of November. Compounding this slowing was a severe snowstorm in Western New York that immobilized retail activity in early December. Reports on new car sales suggest that the district developments reflect national conditions. Sales of small cars appear to be relatively weak and inventories are still high. On the other hand, consumer demand for large cars remains strong. Indeed, Buffalo observers, as well as metropolitan New York City and northern New Jersey automobile dealers, cited insufficient inventories of large cars as limiting sales. Retailers' reports on inventories were mixed—viewed by some as a bit high while considered by others as about right—suggesting that imbalances were not widespread. One senior retail executive stated that disappointing sales in November had resulted in inventory imbalances but that they were not so burdensome as to warrant any special adjustments. Another retailer reported that inventories were up, but he saw no cause for alarm since part of the buildup reflected a decision to carry over some of their surplus of hard goods. At the same time, several department store officials reported that their inventories were in line with sales.
In most other industries, inventories were generally viewed as in balance with sales although exceptions, most notably in metals, were cited. One director considered inventories of both ferrous and nonferrous metals to be high. Another director felt that steel inventories were being cut back, and an official at a Buffalo steel plant agreed. Beyond these areas, inventories were generally felt to be in good balance. The purchasing manager of a major industrial firm noted a more conservative materials inventory policy, reflecting an easing in concerns over shortages. In view of the generally good balance of inventories to sales, one business planner predicted that inventories would move up moderately in 1977 as the recovery continues.
On the price front, respondents generally felt increases recently posted on various materials and products would probably stick. One analyst specializing in the steel industry stated that he had been expecting the steel industry to raise prices before year-end because of their rising costs. Unlike the aborted earlier attempt to raise prices, the recently announced price hike was scheduled to take effect almost immediately, giving steel customers little time to undertake defensive maneuvers. Because of the accelerated timing, the recent price increase was given a good chance of sticking. A steel company official agreed that the higher prices would probably hold because, in his view, the demand for flat-rolled products was strong. A Buffalo director thought that steel companies, wanting to pass on their higher product costs, would refuse to relent on the price hike irrespective of the level of demand. Less sure that the price increase would stick was a steel economist for a major chemical company. According to him, a key determinant was whether or not the demand for automobiles holds up. He expressed surprise at the timing of the price increase and suggested that the possibility of price controls might have been a factor.
While discounting is a widespread practice in the aluminum industry, the price increase on aluminum sheet is likely to hold, in the view of a metals analyst. He termed demand in the aluminum sheet lines as strong relative to rolling capacity, and felt there was very little discounting in rolled sheet aluminum. Synthetic textile producers are reportedly following the industry leader in raising prices. Even though there is excess capacity throughout the industry, a marketing analyst for a major textile company thought the price increase would hold.