Uncertainty over Phase II has not affected the pace of business activity in the District, and businessmen have not let the uncertainty interfere with their prior planning. Retailers are still looking forward to a good Christmas season, and District retail sales during Thanksgiving week were very encouraging. In addition, a recent newspaper poll revealed some improvement in consumer buying intentions for next year. Except for some increase in farm machinery sales, prospects of a 7 per cent tax credit have not yet affected District investment spending.

According to reports received from Bank directors, uncertainty over Phase II has not affected the pace of economic activity in the Ninth District. One director stated that businessmen in his area were going ahead with their plans despite any uncertainty over Phase II. Another director considered Phase II a topic of conversation, but felt that it has not altered business decisions. One report, however, indicated that small businesses had held down, or delayed, raises due to difficulty in interpreting Phase II guidelines. The only adverse impact of Phase II reported by another director was that the time spent by businessmen in interpreting Phase II rules had kept managers away from more productive endeavors.

The directors also felt that the implementation of Phase II has not adversely influenced consumer sentiment in the District, and they reported that District retailers expect their sales to improve. One director, however, did express some concern over consumer skepticism about the effectiveness of Phase II because of the large wage and price increases that have been permitted by the Pay Board and Price Commission. Also, a newspaper poll conducted in the Twin Cities metropolitan area revealed that only 46 percent of the respondents believed that Phase II would ultimately be successful in holding down inflation.

The prospects for District Christmas spending are relatively bright this year. Bank directors were unanimous in expressing the opinion that this would be a good Christmas season for retail trade, and reports from around the District revealed that sales during Thanksgiving week were encouraging. However, one director did state that, while retailers in his area were looking forward to improved sales, they were not exuberant about their expectations. A business economist for a large Twin Cities-based retailer said that he expects Christmas spending at department and discount stores in the Upper Midwest to be up 12 to 15 per cent from a year ago—an outlook shared by a major Minneapolis-St. Paul retailer.

Looking forward to next year, the results of a recent Minnesota poll disclose some improvement in Minnesota residents' buying intentions from a year ago. Last year, 14 per cent of the survey's respondents were planning to buy either a new or used car during the next 12 months. This year, 17 per cent reported they planned to buy an automobile during the next year. Twelve-month buying intentions for home furnishings were also up slightly from 12 months earlier. However, the survey revealed that Minnesota residents did not significantly increase their buying intentions during Phase I, as only 2 per cent reported that they had made unanticipated major purchases during the first 75 days of Phase I.

In the view of Bank directors, the prospect of a 7 per cent investment tax credit has not changed business spending plans in the District. One director, however, did indicate that the expectation of the investment tax credit had stimulated farm machinery sales in his area. In another director's opinion, the 7 per cent investment tax credit would be beneficial in the long run.