September 13, 1972
In general, the District banks report continuing business expansion and a good measure of optimism about future prospects. With few exceptions, retail sales are reportedly doing well. Home building nationwide has fallen back from peaks earlier in the year, but remains very strong in selected areas. Commercial banks are experiencing good loan demand from consumers and small business, while demand from national corporations is more restrained. The employment picture appears to have strengthened a bit further, and expectations of further employment gains were variously noted. The agricultural situation was almost uniformly described as bright, with farm output, income and investment up.
Retail sales were said to be "particularly good" in Philadelphia; strong or improving in the Richmond, Chicago, Minneapolis and San Francisco and Dallas Districts, but only moderate or mixed in St. Louis, Kansas City, New York, and Cleveland. Atlanta and Boston report that the summer tourist season had been strong, but Boston said that vacationers had been "quite careful" with their money. Chicago noted a significant rise in domestic airline traffic.
There was some evidence of increased capital spending. Philadelphia District businessmen expect to increase plant and equipment expenditures within the next six months. Chicago reports that most District producers of capital equipment have been experiencing higher sales and orders, with good prospects for the future. New York also cited some evidence of a strong capital spending outlook for 1973, and Atlanta reported the announcement of several large commercial construction projects, including hotel and office buildings. A survey by Minneapolis found a significant increase in local firms reporting plant capacity as "less than needed".
Construction activity remains at a high level, but District trends are mixed. Atlanta characterized building activity in its District as being of boom proportion. A generally favorable construction picture is also reported by the Richmond and San Francisco Banks. St. Louis reports that while construction activity has apparently leveled off, it has done so at a relatively high rate. Similarly, though the Dallas Bank reports a decline since June, it notes that such activity remains well above last year's level. Cleveland states that residential contracts appear to have peaked in the May-June period and to have declined sharply in July.
The nationwide employment situation appears to have improved further on balance. Richmond reports increases in employment and hours worked per week, and both Richmond and Atlanta found shortages of labor in some areas of their Districts. New York noted shortages of skilled construction workers, and Chicago reported both an increase in help wanted advertising and inadequate supply of quality workers. The unemployment rate is down further in San Francisco. Some other reports pointed to little current change in the job market but, among these, Philadelphia and Dallas found some evidence pointing to future improvement.
Reports from some Banks indicated that concern over inflation remains strong. A number of New York's directors cited the inflationary implications of the large and widening Federal budget and of the heavy calendar of wage negotiations in 1973. Businessmen contacted by Philadelphia expected inflation to be more of a problem in the future. Encouragingly, however, Kansas City found evidence in the agricultural situation that the pressure would be off food prices for the remainder of the year. In this connection, most Banks discussing agriculture-Chicago, St. Louis, Kansas City, Dallas and San Francisco-all reported good agricultural prospects as a result of both higher prices and high production, though Richmond said the outlook in that District is for reduced crops and farm income.