This initial report of economic conditions in the 12 Federal Reserve Districts is based on information gathered from directors of the Reserve Banks, conversations with local bankers, businessmen and economists, regular monthly surveys of manufacturing and trade industries conducted by some of the Reserve Banks, and selected statistical measures of regional economic activity.

Reports from the Reserve Banks clearly indicate that the current overriding domestic concern is inflation. Businessmen contacted generally expect that prices will continue to increase at a rapid rate during the remainder of the year. There appears to be considerable skepticism regarding the ability of economic stabilization policies to achieve a significant reduction in the rate of inflation without generating an intolerable level of unemployment or a
full-scale recession. Similarly, there is evidence of extensive concern about the persistence of strong upward wage pressures, despite some easing in labor markets. The
wage-push problem is particularly acute in the construction industries. Some of the other major factors that are contributing to an underlying tone of pessimism regarding the business situation are prospects for a continued squeeze on corporate profits, concern about the tight liquidity position of some firms, the recent decline in the stock market, and domestic social unrest.

There appears to be no consensus as to whether the economy is actually in a recession—or when the floor of the current slowdown will be realized. Views range from expectations of a further and deeper deterioration in real economic activity to beliefs that recovery is already in progress. The trucking strikes and lockouts have seriously disrupted business conditions in some areas, particularly in the Midwest. Several Districts noted that construction projects have been impeded because of steel shortages, and also because of widespread strikes in the building trades unions. There are also signs that some firms are postponing or stretching out capital spending projects where feasible.