August 9, 1972
According to the directors of this Bank and of the Buffalo branch, the recent business inventory picture on balance has become moderately brighter, and there have been scattered signs of a further strengthening in business plant and equipment spending plans. The directors, however, saw little recent change in the unemployment situation, except for a sharp improvement in those areas of the District where repairs of the extensive damage caused by Hurricane Agnes were underway. Most expressed concern over the wage-price outlook, particularly if the controls are allowed to expire.
Regarding business inventory policies, the respondents felt that the long-awaited rise in business inventory accumulation appeared to have gathered some, if limited, momentum over the past month. While in the view of some of the directors, business inventory policies have remained on the cautious side, others reported some rise in both manufacturing and trade inventories. The president of a large metal-producing firm characterized the rate of accumulation among metal users as "moderate." He said most manufacturers in this field felt that the current level of unused capacity in the metal-producing industry would make it possible to meet any rise in demand through increased production. Other directors, while reporting some increase in inventories, felt that the buildup was not commensurate with the rise in economic activity. They attributed this to improved inventory control spurred, in part, by the relatively high level of interest rates, and to the fact that business had "learned to live" with lower inventories. Thus, the vice president of the largest upstate New York firm stated that both trade and manufacturing inventories were on the rise, although not rapidly enough to keep ahead of sales. Similar views were expressed by the chairman of a sizeable New Jersey bank.
Although most of the respondents saw no dramatic change in the recent past in business plant and equipment plans, the overall assessment of developments in this sector apparently continued to brighten on the whole. Among the Buffalo branch directors, a banker referred to the announcement of a major steel corporation that it was planning fairly large capital spending at its upstate facilities, while another banker pointed to relatively large expansion programs in his area by two corporations. The senior official of the largest upstate firm was the most optimistic, indicating that his firm's capital budget might rise substantially in 1973.
Responses regarding the unemployment situation were mixed. The head office directors, in general, saw little improvement in a generally "soft" job market, particularly with respect to the availability of summer jobs for students. However, a director did point to one exception-the coal industry-where he felt the employment outlook for experienced workers was very good. An upstate banker saw some firmness in the employment situation in his area, while some of the Buffalo branch directors reported a pronounced improvement in the employment picture in those areas where extensive repairs of damages resulting from Hurricane Agnes were underway.
Most directors expressed concern over the price and wage outlook, based, among other things, on the pending increase in social security benefits, the impact of the proposed rise in the legal minimum wage, the heavy 1973 calendar of union negotiations, and even on the upcoming union election in the coal industry which a director—the president of a large metal producing corporation—felt would result in "wholly unrealistic" wage increase demands. The Branch directors did feel that under Phase II, price and wage increases were at a lower rate than previously. However, they expressed concern over what would happen when the control expired, unless some other "ground rules" to curb labor demands were adopted.