June 14, 1972
Reports from the twelve districts indicate continued strengthening in business activity and greater optimism in general. Consumer spending, which has continued strong in most regions, seems to be the main source of strength. Greater output in industries closely related to the provision of final goods, especially durables, was cited as principal source of expanding manufacturing employment and increased business loan demand. Inventories have, for the most part, remained unchanged. Construction of single-family dwellings has continued to boost overall activity. Loan demand at commercial banks has increased, with consumer and business loan categories up most sharply. In general, wage and price increases have been moderate.
Most districts reported encouraging strength in sales of consumer goods. Part of the gain in consumer purchases was attributed by Atlanta, Richmond and Chicago to stronger auto sales; Dallas, however, reported a decline in auto registrations. Major household items and other consumer durables were strong in some districts. Kansas City, Boston and Chicago specifically mentioned recreational items. While retail sales rose in the St. Louis district, the advance was not as great as anticipated by retailers. Slowness characterized retail sales in the New York district, where the outlook was less bright than a month ago.
Steel production was reported favorable in the Chicago and Cleveland districts. The output levels are considerably different, however, for the various steel industry products. Production of steel sheets for use in autos and appliances has displayed the most strength in both districts, while demand for steel used in commercial and industrial construction has remained relatively weak.
Manufacturing activity was reported to be increasing in five districts. Sales of both durables and nondurables advanced in Minneapolis and capital goods orders were strong in Boston. Dallas reported gains in industrial production in April with broad-based strength across industry lines. Manufacturers that supply national markets are reportedly optimistic in the St. Louis district. St. Louis, and Chicago as well, mentioned benefits to manufacturers resulting from reduced foreign competition. Richmond reported strength in district industries. Most districts reported little change in inventory accumulation.
Several reserve banks reported significant employment gains in their respective districts. Philadelphia indicated over 15 percent of the firms responding to a survey added to their payrolls and nearly 5 percent lengthened their average workweek. In the Chicago district, there was an increase in the number of firms adding workers or stretching workweeks, but two major-city governments are still very concerned about unemployment. While Dallas and Boston reported no significant labor market changes, Minneapolis indicated the Ninth District's unemployment rate rose from 5.7 percent in March to 5.9 percent in April.
Construction activity has remained strong in most districts. San Francisco reported that national construction activity gains have aided recovery of the Pacific Northwest because of the greater demand for lumber and wood products. Generally, residential construction has been strong in the nation, but Atlanta reported it appeared to be slowing. Commercial construction has slackened and concern has been expressed for possible overbuilding of multiunit dwellings in the San Francisco and Kansas City districts. Of all the districts, only Atlanta reported anticipation of a surge in commercial construction.
Loan demand in general, and business loan demand in particular, were noted as being quite strong by most districts. Exceptions included New York, where an increase in total loans was not accounted for by commercial and industrial loans, and Kansas City, where business loan demand has also been weak. Richmond and Dallas reported strength in consumer loans, while Philadelphia and Kansas City reported moderate gains in consumer lending. Housing and construction credit were noted as sources of strength in the Dallas and St. Louis districts while in the Philadelphia district future strength in construction lending is anticipated.
Four districts reported continuing strong inflows of savings deposits. One of the four, Kansas City, noted inflows were above year-ago levels but slower than earlier in 1972. St. Louis, Boston and Chicago also mentioned strong savings inflows.
Most districts cited the importance of the Price Commission's role in slowing the rate of inflation. The Minneapolis and San Francisco reserve banks indicated prices and wages were growing at reduced rates, and retail establishments in the Kansas City district have reported no sharp run-ups in suppliers' prices. In the Boston district, suppliers' prices have generally been rising gradually and one director indicated the pace was faster in the second quarter than in the first. In the Philadelphia district, despite expectations of no change in prices paid, 20 percent of the manufacturing firms which responded to a survey were anticipating establishing price increases on their own products in June. Only 7 percent reported price increases in May.
Weather and cattle prices were emphasized in reports on the agricultural outlook. Weather conditions throughout much of the Midwest reportedly had adverse effects on plantings. Excessive rainfall in parts of the Minneapolis and St. Louis districts have retarded crop developments and in the case of Minneapolis caused some switching from corn plantings to grain sorghums and soybeans. Drought conditions have developed in the Atlanta district and the northern part of the St. Louis district.
Higher beef prices were noted by the Chicago, Richmond and Kansas City banks, and the St. Louis bank reported strong sales of farm equipment.