July 18, 1972
Opinions on the current economic outlook expressed recently by the Banks' directors and other business leaders were mixed but on the whole gave a somewhat more optimistic overall picture than last month. Despite the adverse effects of bad weather conditions in June, including widespread damage in the District area as the result of Hurricane Agnes, a number of respondents felt that consumer confidence was strengthening further and that somewhat more liberal inventories buying policies were being pursued. There were also reports of improvements in the unemployment situation in some areas. In general, little concern was expressed over the current international monetary disturbances, nor over the uncertainties related to the developing discussions of Federal income tax reforms.
Concerning the current business outlook, most of the head office directors did not change their recent assessment. In general, they foresaw continued expansion of economic activity over the coming months, and some—if not altogether satisfactory—success of Phase II in curbing the wage-price spiral. One director, an upstate banker, pointed to the adverse effect of the hurricane on the tourist trade in his area and to the extensive crop damage which he feared would have a definite effect upon food supplies later in the year. A Rochester retailer felt that the recent flooding would adversely affect retail sales for one or two months, but he expected a resumption of normal activity thereafter. The responding Buffalo Branch directors, on the other hand, all indicated a more sanguine view, in different degrees, of the business outlook in their areas. They based their revised outlook, variously, on increased retail sales, heavy construction activity, loan demand, and-in the view of one director-"inflationary fiscal policies" that at least in the short run were exerting upward pressures on the economy. Repairs of the flood damages were also mentioned as a stimulating factor.
A distinctly more optimistic outlook was also evident in the tone of the responses of the senior officials of retail firms we usually contact in New York City. To be sure, in their view the bad weather conditions in June had temporarily acted to slow down the gradual rate of growth in consumer outlays that has been underway over the past year. In general, however, they felt that consumer confidence would continue to strengthen, and they looked toward a good year. While still closely controlling inventories, they were now gradually increasing them. (One official, who a few months ago reported that his firm would rather risk losing some sales because of "stockouts" rather than increase inventories, now stated that current policy was to be reasonably certain an adequate supply of merchandise was on hand in order not to lose potential business.)
A few respondents showed some concern over the latest upheaval in the foreign exchange markets, but the majority did not feel that the current international monetary situation was having any serious impact on current domestic economic developments. Some of the retailers, however, did mention encountering some difficulties as a result of the uncertainties regarding the exact dollar cost of their imported lines of merchandise.
With respect to the possible decision-making impact of the developing discussion over Federal tax reforms, most respondents either expressed no opinion or felt it was too early to affect business decisions. Some directors discounted this discussion as "election rhetoric." One director felt that instead of inhibiting business capital outlays, the reverse might be the case as businesses sought to take advantage of favorable tax treatment now while it was still available. Some Buffalo Branch directors, however, reported continued concern on the part of businessmen over the heavy and increasing burden of New York state and local taxes.