April 12, 1972
The directors of the New York Bank and the Buffalo Branch in general felt Phase II still was having a favorable, if not fully adequate, impact on current economic developments, and that the resignation of the four labor members would not cripple the Pay Board. Most of the directors, as well as the retailers who were contacted, continue to be moderately optimistic, on balance, about the retail sales outlook. Views expressed by the directors, however, on the whole suggested that some cooling of the housing boom may be in the offing. According to most responses of the directors and of a number of bank officials, business loan demand has continued sluggish.
Although the directors at both the Buffalo Branch and the head office were not especially enthusiastic over the impact so far of Phase II, they generally agreed that the President's program was having some effect in restraining inflation. Those Buffalo Branch directors who expressed an opinion agreed that the current situation would have been "far worse" without these measures, but they felt that more stringent action would probably be needed to bring inflation under fuller control. The vice-president of a large upstate firm pointed to the slowing down in the rate of growth of nonfood prices so far this year, and similar sentiments were expressed by the president of an upstate bank—a head office director. The chairman of the board of a large New York City bank felt that Phase II had been fairly effective, and he also remarked that the Pay Board had done a "fairly creditable job" in view of the "nasty problems" it had faced. Much the same view was expressed by the president of a large nationwide manufacturing concern. All but one of the directors who commented on the subject felt that the departure of the four labor members would not cripple the Pay Board. Indeed, some of the Buffalo Branch directors thought that this move might result in smoother Board operation. A New Jersey banker, however, reported that his staff foresaw more strikes and a "complete breakdown" of the efforts of the Pay Board.
The recent consumer spending picture has been somewhat blurred by the early Easter holiday, which tended to boost March sales, possibly at the expense of April sales. In any event, the directors and the retailers who were contacted still present a moderately optimistic picture, particularly with respect to the coming months. It is true that the president of a Rochester department store, a head office director, characterized current retail sales in that area as only "fair." And Buffalo Branch directors reported only slightly better performance in western New York this Easter period relative to last year. In each case, however, these directors said that businessmen in their area expected sales to pick up as the year progressed. An official of a high price, high quality New York City department store, who last month had reported a spurt in business by his firm in early March, was more restrained this month. He noted that while sales were still picking up, the rise was only "moderate" and smaller than had been hoped. However, he still remained cautiously optimistic, and he felt that 1972 would turn out to be a fairly good year, up to his store's expectations and better than 1971. An official of a nationwide chain of medium-priced stores, on the other hand, verged on the exuberant. He reported that his firm's business had been picking up smartly, that the increased strength in the demand for bigger ticket items he had noted last month continued in evidence, and that his firm was "very pleased" and looking for a good year. The president of the large nationwide manufacturing concern viewed the strength in his firm's corrugated container sales as signaling a rise in consumer demand.
Regarding residential construction, the overall impression emerging from the views expressed by the directors was that, on balance, it continues strong, but that some flattening-out may be in the offing. An upstate banker reported a considerable amount of apartment and single-family dwelling construction in his area. A New York City banker remarked that a slight rise in the rate of vacancies might not be an unfavorable development, as it might tend to reduce upward pressures on rents. The senior official of the large upstate firm looked for some cooling off of the boom in residential construction as a result of a "slight" rise in the rate of vacancies and in mortgage rates. Buffalo Branch directors reported some concern on the part of builders that supply would soon exceed demand, partly, in the case of Rochester, as the result of a number of urban development projects now underway.
Reports concerning the strength of business loan demand varied somewhat, but, on balance, pointed to continued relative sluggishness. On the one hand, the New York City banker-director reported that demand at his bank was up to levels experienced in a "good year," and an upstate banker-director noted an uptrend of all types of loans at his bank in recent weeks. On the other hand, a Rochester banker, a Buffalo Branch director, while characterizing demand as "fairly good" at his own bank, indicated that reports from the Rochester area suggested such demand continues weak. Similarly, a New Jersey banker reported no pronounced increase in the demand for business loans at his bank. These latter assessments are consistent with the results of a special survey of five New York City banks and four other District banks: four of the five New York City banks reported no, or only seasonal, increases in business loans over the past month, as did three of the four out-of-town banks. A key reason advanced for this weakness was that business generally appeared to be in a fairly liquid position, thus obviating the need for bank credit at this time.