November 10, 1971
Following a moderate expansion throughout most of the year, business activity has tended to level off in recent weeks according to a survey of some leading businessmen. Confusion and greater caution tend to dominate the thinking of business leaders as plans relative to Phase II of the Administration's new economic program are discussed. Construction has apparently stabilized at a relatively high level and, as a result, sales of the construction supply industries and new home furnishings have likewise stabilized. Retail sales of the larger department stores have remained unchanged in recent weeks, but store managers remain optimistic. Output of major manufacturers in the district continues to expand moderately, and some new investment plans were mentioned. Both savings flows into financial firms and loan commitments continue up.
Most of the businessmen interviewed expressed confusion and doubt as
Phase II plans for the Administration's new economic program unfold.
Typical of the expressions was the view of an official of a major
manufacturing firm who stated, "I am somewhat negative at the
moment. We would have been better off without the freeze." Several
expressed the view that the proposed investment tax credit will
help, but at the same time expressed doubts that wages will be
maintained at levels consistent with high investment incentive.
Those interviewed are especially concerned with the confusion
relative to existing labor union contracts and current
labor-management negotiations.
Construction continues to provide the major stimulus to the Eighth District economy. However, after rising sharply during the first part of the year, it has tended to level off recently. Demand growth for building supplies has also slowed. The trend is similar for new home furnishings, such as built-in appliances and synthetic fibers for carpets.
Major manufacturing firms report a continuing moderate uptrend in output and sales. Plastics and fibers for the transportation and home building industries are well above year-ago levels. Factory sales of soft goods are likewise higher. Steel is in a slump as a result of excessive inventories, accumulated in preparation for an expected strike. Leather goods factory sales are also low as a result of rising imports, and the turnaround for such goods is expected to be slow, despite the surtax on imports.
Most officials interviewed would like to see more definite economic policies before making major changes in their investment plans. Some reawakening, however, was noted. Two major manufacturing firms reported expansion projects, and one large retailer, whose outlets are concentrated in the inner city, reported plans for major expansion in the outlying area.
The uptrend of savings flows into financial firms and loan demand continues. Despite the announced decline in the prime rate, mortgage rates generally remain firm at 7 to 7 3/4 percent. Other credit terms, such as downpayment requirements, however, are apparently easing.
The Eighth District agricultural situation is generally favorable. Weather conditions were good throughout the production and harvesting season. Large crops have been produced and harvested, but storage facilities are reported to be short in some areas. This larger volume of farm products has already been reflected in a sizable decline of wholesale prices of farm products, and in a slight decline in the wholesale price of all commodities.