February 3, 1971
Opinions expressed by the directors of the New York Bank and of the Buffalo Branch and other business leaders point to a significantly more buoyant retail sales picture and, on balance, a continued favorable outlook for residential construction. At the same time, most respondents looked for little or no immediate improvement in the unemployment situation nor for any easing of wage and price pressures.
Sentiments expressed by most respondents regarding consumer spending were noticeably more optimistic than a month ago. The consensus was that the spurt in sales in the pre-Christmas week, and the continued favorable retail sales picture in January, might well signal the long-awaited improvement in consumers' attitudes. A typical opinion was expressed by the chairman of the board of a large New York City bank, with close contacts with several large retail firms, who saw a decidedly optimistic turn in outlook just before Christmas and into January. However, several directors of the Buffalo Branch were less optimistic regarding automobile sales, reporting that most auto dealers in their area were experiencing less business than had been anticipated with the settlement of the General Motors strike. One of the Buffalo directors felt that the high rate of savings in the recent past, together with declining consumer debt could well set the stage for a sharp rise in auto sales within the next few months.
Most respondents were generally optimistic about the outlook for residential housing construction. Several of the directors referred to the increased availability of mortgage funds available at lower rates at banks, insurance companies and other financial institutions. Several of the directors at both the New York Bank and the Buffalo Branch, however, noted that the high cost of land and other construction costs could inhibit increased residential construction.
While mixed, opinions regarding the unemployment picture on balance were relatively pessimistic. The chairman of the board of a large manufacturing concern felt unemployment would rise further, while similar feelings were expressed by an upstate banker and the president of another large manufacturing concern. The Rochester businessman reported that unemployment in that city was rising, and that the largest firm in the area was making its employees take one day off without pay a month and was considering ordering additional time off. An upstate banker, on the other hand, expected some improvement in the spring. Another director reported a trend toward less severe layoffs in airlines, electronics, computer-related industries, and light manufacturing, with many job cutbacks accomplished through attrition rather than actual layoffs.
The directors of the Buffalo Branch generally felt that unemployment had peaked, but they did not look for any dramatic improvement over the next few months.
The directors and other business leaders continued to show concern over the wage and price situation. None of the respondents saw evidence of an easing of wage pressures. The chairman of the board of a large New York state utility corporation expressed the feeling that until union leaders can be convinced inflation will actually slow, it will be difficult to get them to reduce their demands. The real purchasing power of workers has barely held even over the last 2 1/2 years, he noted, placing sustained pressure on union leaders to seek higher wage settlements. Most of the respondents saw no signs of price shading. The chairman of the board of the large manufacturing concern did report that while he knew of no appreciable price reductions in the industries with which he was familiar, he heard talk about such cuts elsewhere. Another leading businessman, a director, thought that the only area where price pressures might ease was raw materials.