May 17, 1972
Opinions expressed by Head Office and Buffalo Branch directors and other business leaders point to further advances in economic activity. Plant and equipment spending is apparently being upgraded, consumer confidence is improving, and the demand for business loans is strengthening. The unemployment situation, however, while improving slightly, remains far from satisfactory.
Most respondents looked for a further upgrading of plant and equipment spending over the balance of the year, but were more restrained regarding the strength of the upswing than suggested by recent surveys. Among the Head Office directors, the chairman of the board of a large New York City bank thought the capital expenditures outlook was good, but not as favorable as the McGraw-Hill Survey indicated. The president of a large nonferrous metal firm stated that recent reports of an upgrading of plans for capital outlays may be "fairly accurate," but could not confirm these on the basis of his business' own experience. The Buffalo Branch directors felt the tone in the capital goods sector was taking a turn for the better and reported that a number of small businesses were expanding facilities and that the demand for improved equipment was particularly strong. However, a Rochester retailer, a Head Office director, stated that while the largest upstate firm was adhering to current expansion plans, several other companies were planning cutbacks. Opinions expressed by some business leaders were also less optimistic: A senior official of a large electric equipment firm said talk about heavy capital spending was not reflected in his firm's heavy machinery business, which was slow.
As noted in last month's report, the March-April retail sales picture has been somewhat blurred by the early Easter, which favorably affected March sales. Nevertheless, the views expressed by most respondents, on balance, point to the emergence of a brighter consumer spending picture. Most of the Buffalo directors thus reported a pickup in retail sales following a somewhat disappointing Easter season in Western New York, and these directors felt that consumers' moods had brightened. Most reported local retailers are expecting to meet 1972 sales projections as consumer demand continues to strengthen. Among the Head Office directors, the large New York City banker found the retail picture fairly encouraging, and the Rochester retailer was optimistic about the outlook, despite the fact current business in the Buffalo-Rochester-Syracuse area was not good. The vice president of a large nationwide chain of department stores reported that sales in both March and April had been good, indeed better than his firm's expectations, and that on the basis of preliminary reports, the trend was continuing in early May. He noted special strength in home appliances and furnishings, presumably linked to the occupancy of new housing. In his view, the consumers have not become reasonably confident, and his firm was optimistic regarding the remainder of the year. Moreover, indirect indications of gathering strength in consumer sales were also evident in the comments of several manufacturers. Thus, the senior official of the electric equipment firm reported their consumer goods sales were moving well, in some areas with "considerable strength," while the president of an upstate manufacturing firm reported a significant pickup in his company's sales of auto parts.
Those directors who expressed an opinion on the business loan situation reported a strengthening in such credit, primarily related to construction projects. Three of the Buffalo Branch bankers pointed to the increase in loans to finance the construction of multiple dwellings units, including condominiums. One of these directors, while noting the strong demand for construction credit, referred to the sluggishness in demand from national firms, which he felt were raising needed funds in the equity and bond markets rather than drawing on their credit lines. Some of the respondents expected an eventual improvement accumulation would bring further increases in the demand for business loans. With respect to other types of loans, among the Head Office directors, the president of an upstate bank reported a strong demand for credit in his area, especially in mortgage loans for new apartments (but also for new factories), while the chairman of the large New York City bank stated that loans to finance companies and real estate loans have been particularly heavy.
The Directors felt that some improvement-albeit scattered and as yet limited-was occurring in the unemployment situation. The president of the metal producing corporation reported that there seems to be some improvement in Arizona and California and pointed to the fractional rise in March and April in help wanted advertising in the West and Southwest. The New York City banker felt the situation had improved slightly, but remarked that a decline in the overall unemployment rate was difficult because of the sizable influx of new entrants into the work force. The Buffalo Branch directors generally agreed that there had been some recent improvement in the local employment situation, but noted that this must be viewed against the high unemployment rates prevailing during the winter. They noted that the local picture was still not good-while skilled workers were again in demand, unemployment among the unskilled would continue to plague the area.