Beige Book Report: San Francisco
May 20, 1970
General
There is no consistent pattern of views and anticipations
regarding economic conditions in the Twelfth District. Moderate
growth in business characterizes the District generally, including
both Washington, one of the hardest hit sections, and Arizona,
previously showing the greatest growth. Declining output and
employment in some parts of Oregon are continuing and spreading,
while both buoyant and depressed conditions are reflected in various
areas of Southern California.
Random Notes by Industry
Reports on recent agricultural conditions
vary from "agricultural disaster due to weather" and "agricultural
recession" to "excellent growing conditions and bumper crop
prospects."
Logging and lumber mills continue slow, with outlook favorable until mid-1971. The layoff rate has been reduced at one large aerospace firm, but is becoming manifest in a limited way in some other industries. In education, wages are "high" despite heavy demand for the scarce new positions. Severe gasoline price wars are evident in many locations, aggravated by the introduction of new types of gasoline.
Housing generally continues in short supply with construction depressed, while apartment vacancy rates vary from low to very substantial. Industrial and commercial construction is "fairly active" in Utah. One manufacturer reports a volume market and good prices. Another reports a profit squeeze; he was "forced to raise prices against a soft market; the raise was accepted as unavoidable" (except for the attempted cut in distributors' margins).
Summary for Selected Economic Aspects
Employment
New jobs are becoming less easy to find, actual cutbacks in total employment are
occurring in an increasing number of firms as a part of cost-reduction programs. Significant expiration of unemployment
compensation benefits is expected in June and July in one area.
Strikes
Both current and anticipated labor difficulties were
mentioned.
Wages
Wage conditions vary from constant to rising. There is even
wider anticipation—except in strictly agricultural communities—of
future wage boosts.
Other Costs
Increasing costs of purchased goods were mentioned,
but one respondent writes that "dealers are selling equipment at
below cost to reduce inventories."
Prices
Prices on the respondents' own products vary from "recently
strengthened markedly" to "started declining about 30 days ago."
Higher posted prices and competitive price-cutting left one
industry's average retail price higher on balance; expectations are
for hardening prices. Despite a slowdown in one area, a strong
upward price trend was noted. In another, upward pressures are
expected to continue with the rates of increase "diminished from
those of recent experience."
Profits
In one industry expecting both wage increases and
employment cutbacks, "a number of companies have announced that they
expect slow improvements in net earnings as 1970 proceeds."
Market Psychology
In one sensitive-commodity industry, "the
psychology of buyers and sellers has changed recently" (in a
deflating direction): "the tendency of buyers is to go increasingly
to a hand-to-mouth basis."
Sales
Sales reports vary from "curtailed" through "constant" to
"up." Higher new orders and lengthening delivery time were noted in
one community. In the Portland zone retail sales "have reflected a
definite improvement within the last 30 days," in contrast to the
more general expectation in that zone of even more softening in
retail sales.
Inventories
Both higher and lower inventories are reported.
Plant and Equipment Investment
Both high and low levels of capital
spending, as well as "no change," are reported, with cutbacks more
frequently mentioned.
Credit
According to the banker respondents, "ample" to "adequate"
credit is available. Users of credit vary in their judgments on this
score from "a little easier to obtain," through "very difficult, but
not substantially more so than a year ago," to "very tight for
agricultural loans from commercial bank sources."
Bank liquidity short of distress was noted. Expansion of several retirement communities is currently being held up for lack of funds. A continuing increase in overdue or delinquent receivables was reported, partly attributable to strike-induced delays. A large international conglomerate indicated that accounts receivable have slowed from 70 to 80 days; the very substantial costs involved could not be passed on.
Policy
In one community the impotence of monetary policy and the
need for wage and price controls had become the subject of common
discussion on the street. Elsewhere the lack of needed wage-price
guidelines was noted, with the "unconscionable increase in
inflationary conditions in services" emphasized.