March 9, 1971
Reports from business leaders reveal that 1971 is off to a slower start than even they had predicted, especially in the area of retail sales nevertheless, most businessmen and bankers think there is some reason for cautious optimism. Inflation is still causing concern.
Retailers report that 1971 sales are off to a disappointing start.
For example, an auto dealer describes his sales as up one week down
the next. A major department store concern indicates slow January
and February sales and that prices are still rising. Also, customer
delinquencies are twice their
year-ago level. The President of a
luxury jewelry firm says
high-priced merchandise is still selling
slowly, but that moderate-priced lines are moving well. He added
that watch and diamond prices have not been going up. A
representative of a major appliance manufacturer reports that his
company has not noticed a turnaround in consumer spending. Added
evidence of weakness in retail sales is indicated by the behavior of
sales tax receipts, which have risen only slightly in some areas.
There are other signs that business is only stabilizing rather than expanding strongly. Telephone revenues from commercial and corporate accounts, especially for long distance calling, have been rising sluggishly although residential demand has remained strong. A diversified electrical manufacturer reports that the only area of his business with a substantial backlog is electric generating equipment. According to a paper producer, newsprint sales were weak in January. Also, aerospace-related layoffs have occurred in a few areas. A firm that fabricates metal for aircraft parts is reported to be cutting its overhead by $30,000 per month. A leading apparel manufacturer in Tennessee, previously a very steady employer, recently laid off workers.
Nevertheless, reports from businessmen and bankers throughout the District indicate that confidence is building. Some optimism is being generated by reductions in interest rates and increases in the availability of financing. An auto dealer is encouraged by reductions in his interest expenses, which he expects will permit greater merchandising efforts that, in turn, should help improve the retail market. Construction activity is strong in several areas, with interest rate reductions expected to encourage further revival. However, there have been rumors of vacancies in some apartments catering to singles.
Price increases continue, especially in utility rates, and inflation remains a concern. Construction industry representatives do not think the repeal of the Davis-Bacon Act will have much impact.