Beige Book Report: Dallas
December 8, 1971
Retail sales in the District were somewhat more sluggish during the 90-day wage-price freeze than during the three months prior to the August 15 announcement of President Nixon's new economic program. This was the opinion of executives at a sample of retail firms in the Eleventh Federal Reserve District. Inventory positions at most of these firms are, at present, slightly excessive. Nevertheless, a large majority of the respondents are mildly optimistic about prospects for sales during the Christmas buying season and on through the first half of next year. However, only a few of the respondents expect employment in their firms to increase during the next seven months. The costs of the merchandise purchased by these firms, as well as retail prices they charge their customers, are expected to rise moderately through the first half of 1972.
In the three months prior to the August 15 announcement of Phase I, the dollar value of total sales increased for nearly three-fourths of the retail firms surveyed, and remained unchanged for the remainder. For about one-fifth of these firms, dollar sales rose substantially during this period. During the 90-day wage-price freeze, however, only half of these firms recorded sales increases, and none recorded substantial increases. Moreover, 10 per cent of the firms indicated that their dollar sales declined during the freeze.
Sales of durable goods by these firms increased moderately both during and prior to the freeze. Hence, the weaker total sales activity reflected the performance of nondurable goods. In the three months ended August 14, sales of nondurable goods rose substantially for 20 per cent of the firms, rose moderately for 30 per cent, and remained unchanged at the other retail stores. During Phase I, however, nondurable goods sales advanced only moderately for half the firms, remained unchanged for 40 per cent, and declined for 10 per cent.
Four-fifths of the respondents expect total sales of their firms to increase moderately during both the Christmas buying season and the first six months of 1972. Despite the respondents' mild optimism over prospects for sales, most of them believe that employment in their firms will remain essentially unchanged through mid-1972. Almost two-thirds of the firms surveyed consider their inventory level to be excessive, while the rest are currently carrying evenly balanced positions. Most executives also believe that the selling price of their merchandise and the cost of their inventories will increase moderately through June of next year. The profit outlook is somewhat more encouraging. Half of the firms believe that profits during the first half of 1972 will rise moderately, while the remaining half believe that profits will not change.
All of the respondents indicated that the import surcharge and the floating of the dollar in the international exchange markets have caused the prices of imported merchandise to increase moderately. And since August 15, the dollar value of sales of imported merchandise has risen moderately for only 45 per cent of the firms, remained unchanged for 33 per cent, and decreased moderately for 22 per cent. However, the weakness was at least partly attributed to the East Coast and Gulf Coast dock strike.
For the District as a whole, recent data suggest economic conditions are improving. Department store sales were 7 per cent greater in the four weeks ended November 20 than in the corresponding period a year before. Registrations of new automobiles rose significantly in October from their level in September. Total nonagricultural wage and salary employment in the five southwestern states continued to rise in October as employment increased in both the manufacturing and nonmanufacturing sectors. Although, overall, nonmanufacturing industries increased their employment in October, there was considerable variation from industry to industry. Government provided the primary source of jobs in the region in October. Among the other categories, only construction and trade showed increases in employment. The seasonally adjusted Texas industrial production index slipped slightly in October after recovering in September from a midyear slowdown.
The oil allowable was increased from November to December. In raising the allowable, the Texas Railroad Commission pointed to a reduction in crude inventories in November. But, with imports greater than a few months ago, the Commission held the increase to only a marginal advance. Allowables in other producing states of the Eleventh Federal Reserve District, however, were left at November levels.