July 18, 1972
According to our directors, business activity is continuing to expand at a satisfactory rate. Consumer spending is climbing with higher than usual increases in June reported for retail sales in many areas of the Twelfth District. Automobile sales in particular are doing very well. Construction activity continues to be an important factor in the expansion, although signs of weakness are appearing that indicate a slowing later in the year. Agricultural prospects are generally good in most District states. Financial conditions are little changed with only minor movements in interest rates reported.
Retail sales are higher in June throughout most of the District, and in a few cases increases of 12 percent and more occurred over the previous month. For example, in Oregon, appliance sales are 12 to 15 percent above last year's level, and Southern California department store sales rose an impressive 12 percent in June to stand 8 percent above the previous year. There are exceptions reported for individual dealers in Oregon and Seattle, but the consensus seems to be that aggressive retailing efforts are producing higher sales.
Automobile sales are running as high as 20 percent for some dealers, and most dealers expect current trends to continue. American made cars and trucks seem to be doing best, for there is some indication that foreign car dealers are actually experiencing declining sales. One factor in this latter trend is the advantage of domestic car dealers in having better resale facilities for trade-in cars. Sales of recreation-type vehicles and trailers are reported 20 to 30 percent higher by some local manufacturers.
Despite the satisfactory level of sales and a feeling of optimism by retailers about future sales prospects, there is no sign of any major rebuilding of inventory. Retailers, both small and large, are still operating with inventories at a minimum level. They are still trying to keep inventories down, and, if anything, many are attempting to find ways to reduce them further. Optimism about sales is combined with caution about inventories.
Other factors are helping retailers operate with lower inventories. A major reason, according to several directors, is that suppliers are quick to fill orders, thereby reducing the need for inventories. Appliance dealers in the Los Angeles area are described as relying on the close proximity to suppliers to cut down their inventories. Finally, retailers foresee no shortages developing that would require a change in their current policy.
A good year is expected for District agriculture. Cattle prices are high and in turn are keeping up the demand for feed grains. Crop conditions in the Pacific Northwest, Idaho, and Northern Utah are good, with the notable exception of fruit crops in parts of Washington and Idaho which had suffered from late frosts. Southern Utah has been experiencing a drought, and recent storms have brought only a slight improvement; in this area livestock and crops have suffered.
Construction activity remains good, especially for single family homes. Suppliers for the construction industry remain optimistic, and employment in the wood products industry is high in Oregon and Washington. These industries related to construction provide the only example where inventories are being built up. Yet there is evidence in the recent leveling off of California dwelling unit authorizations that declines in total activity can be expected later in the year. Overbuilding of multi-units in Oregon also may present problems. These elements of weakness are not general, and no immediate decline appears to be likely.
Most bankers see little change in financial conditions. Demand for loans is strong in the Seattle area and rising in Oregon after a period of stability. Trends in deposits in most states are mixed, with both increases and decreases reported. Only minor increases in interest rates have taken place.