Beige Book
National Summary

March 12, 1975

The general impression given by this month's Redbook reports is some moderation in the rate of decline in economic activity. While no District reports suggest that a general economic upswing is "just around the corner", with some exceptions the March reports indicate that the deepening pessimism that had characterized businessmen's outlook in previous recent months may have abated significantly. Respondents in most Districts either expect a turnaround at some point in the second half of the year, or expressed relatively bullish sentiments regarding prospects for their individual firms and industry. Retail sales were generally described as running at a lower level than a year ago in unit terms, but the decline in consumers' outlays in general appears to be leveling off, and some Districts actually reported some improvement. Retail inventories have been substantially reduced, but manufacturers' inventories still remain high. The outlook for the housing industry on balance appears to be improving, if only slightly. There were further reports of price cutting, both at the retail and production levels. On the darker side, the employment situation continued to deteriorate in many parts of the country.

Among the comments regarding the economic outlook, Boston reports that its directors were more hopeful, and while they did not as yet believe the economy to be on the threshold of a turnaround, they felt that following the rapid deterioration in previous recent months, business activity was now stabilizing. Philadelphia reports little change in economic activity, which it considers an improvement compared with the declines in previous months. Moreover, it notes that businessmen in general expect the District's economy to pick up in the fall. Similarly, while Richmond reports a continuation of a broad decline in economic activity, it also reports an easing of the pervasive mood of pessimism displayed during the past few months as more businessmen now see "a light at the end of the tunnel." St. Louis reports that the rate of decline in unemployment and output has moderated, and indeed notes that activity in selected industries continues at relatively high levels. Respondents in the San Francisco District expressed the belief that conditions in the District's hardest hit industries—construction, lumber, and transportation equipment—have now stabilized. On the other hand, Chicago reports that pessimism has not been so deep and widespread since the 1930's.

Retail sales continue to be generally sluggish in most Districts, but there appear to be scattered encouraging developments. St. Louis, for example, observes that no further decline in department store sales has been reported. Cleveland reports that bonuses as well as rebates spurred a sharp jump in auto sales in February, while more modest increases were reported in several other Districts. Dallas reports a rise in sales, with big-ticket items in particular moving well ahead of their sluggish pace of recent months. Atlanta, on the other hand, reports that home appliance sales have been particularly weak but that apparel sales have been doing well. A very recent pickup in retail sales was observed by Kansas City and New York, while Philadelphia reports optimism on the part of retailers despite sluggish sales. Minneapolis reports that retail sales have held up well in Montana and that the area's businessmen have grown more optimistic. Most Districts commenting on the subject report a decline, in varying degree, in retailers' inventories from their excessive levels at the turn of the year. Continued high inventories at the manufacturing level, however, are mentioned by a number of Banks, including Atlanta, Boston, Cleveland, and Richmond.

Activity in the housing industry in general continues at a low level. There were indications, however, that the industry may be coming out of its slump as mortgage funds become more readily available with the sustained inflow of funds to thrift institutions and as the inventory of unsold residential units is being worked off. Atlanta and Kansas City report some improvement in home sales. Cleveland reports a moderate rise in residential construction contracts from their severely depressed levels, while builders in the St. Louis District anticipate an early increase in residential construction activity.

The darkest spot in the current economic picture, of course, is the high level of unemployment reported by most Districts. Richmond reports that unemployment rates have risen to record levels in many areas. Minneapolis reports a sharp rise in unemployment in January, although the jobless rate for the District remains below the nationwide average. Cleveland mentions that numerous lay-offs have been reported thus far in March, while Chicago also refers to "waves" of lay-offs in durable goods industries. San Francisco and Philadelphia respondents do not look for an increase in the level of employment over the near term, which combined with the growth in the available labor force is expected to be reflected in further increases in the jobless rate. On the other hand, Kansas City notes an improvement in the employment situation at automobile manufacturing plants in the Kansas City area, while St. Louis mentions that scattered reports for February suggest a leveling off of the unemployment rate.