Beige Book Report: New York
May 14, 1975
Second District directors and other business leaders who were contacted recently in general were restrained in their assessment of the retail sales picture, although some retailers were reported to expect business to pick up in the not-too-distant future. Views were mixed regarding the outlook for consumer prices. Some businessmen indicated an inclination to raise prices by cutting production if necessary, while some others expected reduced demand and excess capacity to exert downward pressure on prices. The respondents generally agreed that good progress was being made toward reducing inventories to desired levels.
The Buffalo Branch directors in general felt that the demand for automobiles and other consumer durable goods would remain depressed through the rest of the year and perhaps into 1976. These poor prospects were attributed to the continued lack of consumer confidence, high prices, unemployment, and, in the case of appliances, to the questionable outlook for an upturn in homebuilding during the balance of the year. Several of the respondents were also restrained in their assessment of the current retail sales picture. A survey of New York City's major department stores conducted by a local newspaper revealed that these stores in April had suffered the biggest year-to-year decline in sales in five years, reflecting in part cool and rainy weather conditions, as well as high unemployment in the city. On the brighter side, retailers were reported to be generally optimistic and to believe that business in the city must pick up soon. In this context another respondent expressed the belief that consumers were reaching the end of "stretching" out their inventories of automobiles, appliances, and other goods, a development he felt was a good sign for the economy generally.
Regarding the outlook for prices, a senior official of a large New York City bank felt that most manufacturers and processors wished to maintain their current prices, even if this means cutting production in the face of reduced demand. The president of a large textile concern indicated that his company intends to increase its prices when it has the opportunity. Several other respondents expressed similar intentions. On the other hand, the Buffalo Branch directors and several other businessmen looked for continuing downward pressure on retail prices throughout most of 1975. In their view reduced demand and unutilized capacity should lead to heightened competition which in turn should be manifested in lower prices.
The respondents on balance agreed that although many businessmen do not yet feel comfortable with the current level of their inventories, a good deal of progress has been made in reducing such inventories to acceptable levels. Indeed, a number of respondents reported that in the case of their own firms or industries, desired levels had already been attained or soon would be reached. Thus, among others, the president of a large chain of department stores reported that his firm's inventories were now in line with estimated sales. A senior official of another retail concern reported his firm's inventories to be down 15 to 20 percent from a year ago. An upstate New York businessman stated that some retailers in his area report low inventory levels. Another director, commenting about the automobile parts industry, noted that inventories of finished goods in that industry have now reached nearly acceptable levels, and that stocks of raw materials would probably be worked down to desired levels within the next two months.