October 13, 1971
Although retail sales were relatively slow in many parts of the
Tenth District in August and September, most major retailers are
anticipating a better performance for the rest of the year. A number
of firms will be increasing inventories because of their optimistic
sales outlook. Few retailers attribute their optimism to the new
economic programs. Automobile sales and residential construction
have remained generally strong across the District, despite some
weakness in other
large-ticket items. Demand deposits have declined
recently at Tenth District banks, and business loan demand remains
sluggish. Some bankers feel that the new economic programs have
adversely affected consumer attitudes and consumer loan demand.
Major department stores were surveyed in Kansas City, Wichita, Denver, Omaha, and Oklahoma City—some of which were able to supply information about a wider geographic area. Retail sales in Denver showed a mixed picture, with reports varying from reluctance to make commitments for large appliances to software sales remaining strong. The general feeling among Denver merchants is that, so far, the new economic program has had little impact on retail sales. Several merchants reported that some major purchases were being postponed because of uncertainty and the pay freeze.
Omaha stores reported considerable gains in sales this year over last year but very little gain in August and September. They felt that there would be good sales the rest of the year for big-ticket items, with the advantage going to automobiles to the possible impairment of softgoods sales. On the whole, they expected only a moderate increase in sales this Christmas season. In the Oklahoma City area, a downtown store reported a moderate sales increase this year, while a major suburban store reported a larger increase. Both were somewhat optimistic about the rest of the year, but neither credited the expected improvement to the new economic programs.
Department stores in Kansas City reported sales this year as being generally better than last year; however, there was considerable variability. Most retailers reported sales for the year as being good. However, some reported sales in August and September as being unusually strong, while others reported sales in these months as being much slower than earlier this year. The stores reporting unusually strong sales attributed the strength to factors other than the new economic program. Merchants in Kansas City generally are optimistic about the rest of the year and have purchased inventories in anticipation of a slight increase in sales over last year's very good December performance.
There is considerable variation across the District in other parts of the economy both by industrial sector and geographic area. Automobile sales are strong but, in many parts of the District, are not reflecting the strength shown nationally. Residential construction appears to be booming nearly everywhere except in Wichita, where housing activity is slow. Wichita is still an area of substantial unemployment (more than 9 percent), and it may be noted that retail sales there present a mixed picture. However, August was a good month for shipments of general aviation aircraft from Wichita, and continued employment gains in the aircraft and parts industry are expected in the near future.
Demand deposits have declined noticeably at Tenth District banks in recent weeks, a period in which rather sharp gains typically occur. Some of the decline is accounted for by correspondent balances, but IPC deposits have dropped also. Bankers interviewed fail to detect any tendency for this weakness to be concentrated in either business or personal accounts. Some indicated that local business accounts are holding up better than their national accounts. The weakness in consumer-type time and savings deposits noted in the past two reports has not continued, as these accounts have expanded rather sharply in recent weeks. Growth in large CD's continues but at a slower pace than in July and August.
Business loan demand remains quite sluggish at District banks. Residential mortgage and construction loans and, to some extent, consumer installment loans remain the areas of strength in the Tenth District. Bankers contacted still have detected no impact on consumer loan demand from the new economic program. Indeed, some profess to detect an adverse note. It is stated that consumers are impressed by the fact that their incomes are frozen but have some doubts about the effectiveness of the freeze on prices. This attitude, some bankers felt, appears to be solidifying existing consumer caution.