May 5, 1971
A distinctly rosier picture of consumer spending than that painted a month ago emerged from the views expressed by the Directors of this Bank and of the Buffalo Branch, and other business leaders. With some exceptions, however, business confidence outside of the retail area was less than strong. Nevertheless, the implementation at this time of fiscal measures to stimulate the economy were generally opposed, reflecting concern over the continued presence of inflation pressures. The President's program to curb the rise in cost in the construction industry was given little or no chance of success.
With respect to consumer spending, the Chairman of the Board of a large retail chain that includes a number of sizable department stores, and a large diversified apparel manufacturing business, was very optimistic. He reported a sharp increase in his firm's sales in recent weeks both through its own outlets as well as to other major retailers, and felt that the consumer had finally "turned loose". The vice president of another large retail chain reported that his firm's business had picked up somewhat in the past month, and that he looked for a good increase in the months ahead. Similar sentiments were expressed by the president of a relatively high priced New York City department store with branches in the suburbs, while the president of a large medium priced store felt there had been a definite improvement in recent weeks, and assessed retail sales prospects with "restrained optimism". Several presidents of upstate banks saw an upsurge in consumer confidence, while the president of a textile firm stated that his retail store customers were building up inventories of his firm's products. Indeed, with varying degrees of enthusiasm, all the Directors and other business leaders that expressed an opinion on the subject felt either that sales had picked up in the past weeks or shortly would do so.
Views expressed regarding business confidence were somewhat more guarded. The chairman and president of a diversified electronic concern did not look for a "roaring upswing" in business in the immediate future. The president of an upstate bank saw businessmen as hopeful, but waiting to see more sign of an upturn. Some of the respondents, however, expressed the opinion that the rise in consumer spending and the concomitant increase in reorders should soon be reflected in a strengthening of general business confidence.
The president of one of the largest construction companies in the country stated that he was very optimistic "over the immediate future". He did express concern, however, over the labor costs in the construction industry. He looked for continued high wage increases, with little or no improvement in productivity. He felt that the President's voluntary program for wage and price restraint had "no real teeth" and probably would have little effect. Indeed, the respondents that expressed an opinion on this subject showed an almost total lack of confidence in the effectiveness of this program. This attitude was perhaps best summed up in the remarks of the vice president of Rochester's largest firm, a Director, who stated that he saw no chance for success in the program, and who indicated that his contacts with the organized construction industry "show no influence from the program".
Continued concern over the danger of refueling inflationary pressures was also reflected in the fact that even though business confidence still seemed to be lacking real strength, all but one of the respondents who commented on the topic felt that it would be unwise at this time to attempt to speed economic recovery through additional fiscal stimulus through the tax cut speedups that have recently been proposed. Most agreed, however, that if fiscal stimulus is desired, the implementation of these proposals would be the best way to proceed.
With respect to bank lending policies, most bankers reported that their banks were seeking to make new loans, in some cases aggressively. The Chairman of the Board of an upstate bank, however, noted that the easing of credit terms seen in commercial centers had not spread to country areas, and that his bank was not aggressively seeking new business loans.