November 10, 1971
The consensus response to our monthly phone survey of Federal Reserve bank directors is that district consumers have not yet reduced their savings rate or begun to spend accumulated savings. The district's strong increase in housing construction has stimulated sales of furniture, home furnishings, and appliances, and these retailers are quite optimistic about the future. Directors are unaware of any pressure for large pay increases after November 12, but generally feel that previously negotiated pay hikes will have to be granted. District manufacturers foresee their sales improving in the fourth quarter and during the first half of 1972.
Although one director detected some decline, the consensus was that the savings rate of district consumers has not yet been reduced. Most directors reported that savings deposits have continued to rise, and one director disclosed that his bank had just concluded its most successful promotion to attract new savings accounts. Skepticism was also expressed as to whether or not district consumers would start to spend accumulated savings. However, one director did indicate that he expected the savings rate would come down and that consumers would start liquidating accrued savings.
District housing unit authorizations in the four-month period ending in September were 29 percent above a year ago, and bank directors report that this has stimulated district sales of furniture, home furnishings, and appliances. One director revealed that furniture dealers in his area have a backlog of deliveries, and that furniture manufacturers are having some difficulty filling orders. Several directors also indicated that retailers expect furniture and home furnishing sales to continue to improve.
Bank directors detected no pressure in their areas for large pay increases after November 12. One stated that workers in his area were just anxious to retain their present jobs and maintain their current incomes. Two directors felt that union members would be willing to settle for smaller pay increases than labor leaders are demanding, while another indicated that a union he deals with is not too concerned about pay board guidelines as it feels it has the political clout to eventually surpass them.
Directors generally believed that after November 12 workers would be reluctant to sacrifice any previously negotiated wage increases which were foregone during the freeze. According to one, workers in his area might be willing to give up retroactively-paid increases but would expect to receive the higher wages after the freeze. Another stated that differences between pay board guidelines and negotiated wage increases would eventually have to be given to workers. Previously negotiated wage increases were considered to be legal commitments which have to be honored by another director.
According to the preliminary results of our fourth-quarter industrial expectations survey, district manufacturers continue to expect that their sales growth will improve in the fourth quarter and during the first half of 1972. After surpassing year-earlier levels by 5.2 percent during the third quarter, district manufacturing sales are expected to be up 9.7 percent from a year ago in the current quarter before advancing 8.2 percent during the first half of 1972. The current sales predictions are very close to those made for their respective quarters in the third-quarter survey.
The optimistic outlook for district manufacturing sales can be
attributed to a rejuvenation in durable goods sales. In the third
quarter, district durable goods sales surpassed
year-earlier levels
for the first time in a year and are expected to strengthen during
the forecast period. Much of this expected improvement can be traced
to the district's lumber and wood products, electric and nonelectric
machinery, and scientific instrument industries. No significant
increase in the rate of sales gain is foreseen by district
nondurable goods manufacturers.