The pessimism regarding the economic outlook that had been expressed by the directors of the New York Bank and of the Buffalo Branch last month was still evident, and perhaps intensified, this month (before the Administration announced its new measures). In general, the assessment was for no significant change in consumer attitudes, while some directors believed there had been an actual scaling back of buying intentions; business inventory spending was not expected to strengthen in the near future; no noticeable improvement in labor market conditions was foreseen and most of the directors felt that a general economic upturn would gain momentum later than had been generally expected.

Concerning consumer spending, the Buffalo Branch directors viewed retail sales activity as relatively better than a year ago, but with no discernible trend either up or down. The New York Branch directors were somewhat more pessimistic. A director from Rochester had had recent discussions with a cross section of New York City department store executives, who reported a slowdown in consumer spending in recent weeks and were generally pessimistic regarding the immediate future. The chairman of the board of a nationwide manufacturing concern believed that consumers were exhibiting caution and more selectivity regarding both price and quality, and saw consumer reluctance showing up particularly in discretionary spending, such as that for travel. Other directors also thought there had been a scaling back in consumer buying plans.

One director, the president of an upstate New York bank, commented on construction activities. He referred to the recent experience, which he felt was fairly typical, of a general contractor in his area who builds schools, factories and other nonresidential structures. This contractor, after many years of good business, now had few orders, a development that the contractor attributed to high construction costs, particularly wages.

With respect to business inventory spending, several directors expressed the opinion that such outlays would continue to be sluggish, largely because of more stringent inventory controls as part of cost-reduction programs.

No noticeable change in the unemployment picture was expected by the Buffalo Branch directors. They believed that layoffs in the steel industry would offset employment increases in the auto industry and in seasonal construction.

All the Buffalo directors expressed concern about the expected further erosion of the steel industry's competitive position in both foreign and domestic markets as a result of the recent steel wage and price developments.

Regarding this country's foreign trade in general, the Rochester merchant who is on the New York board noted that sales of imported goods have been increasing steadily. Another director expressed the opinion that the continued deterioration in this country's exports was due chiefly to high prices resulting from high labor costs, while a third director found our recent adverse trade balance surprising, since European countries were also experiencing a high rate of inflation.

To assess recent developments and expectations for the next two months, in commercial bank savings and consumer-type time deposits and in loan demands, nine District Banks were contacted August 11-13, five in New York and four out of town. The majority of the banks reported that the strong increase in their deposits in the first five or six months of this year had been replaced by a "slow attrition," and most of them expected the attrition to continue or the rate of advance to flatten out. At a majority of the banks, demand for commercial and industrial loans had been "weak" or "lusterless" recently, and the banks expected only seasonal fluctuations over the coming months.

As regards the general business outlook, all the directors, both of the New York Bank and the Buffalo Branch, were relatively pessimistic concerning near-term developments, with some directors noting that they thought a strong upturn would take longer than they had previously anticipated. Several directors expressed (before President Nixon's August 15 address) a lack of confidence in the Administration's economic program.