The consensus of the reports by the twelve Federal Reserve Banks is that the economy is in a sidewise movement with few signs of strength in any sector. Businessmen have generally become more cautious with respect to plans for the remaining months of the year. Instead of an early vigorous recovery as envisaged by some in earlier reports, business leaders now view the outlook less optimistically. Profits have declined and many firms have responded with cost cutting measures, including employment cutbacks, reduced inventories, and in some instances a reduction in planned capital investment.

Most Districts report "sluggishness" in sales with few optimistic comments. Although total retail sales appear to be holding their own, the volume is generally below expectations, and inventories are being evaluated carefully. Consumer durables are generally the sector hardest hit, with television sets and large appliances moving very slowly. Both New York and Minneapolis mention retarded sales of newer clothing fashions, while St. Louis and Boston indicate that the shoe industry is facing declining sales. Several Districts report that consumers are switching to lower quality merchandise in response to rising prices. The lower sales in some lines were apparently offset by a continued uptrend in sales of food and a few other products, such as steel, domestic oil, and automobiles.

Most Reserve Banks report that although labor markets are relatively weak, unions have won major wage increases. Unemployment appears to be rising slowly. Most reductions in labor usage are taking place through normal attrition, unpaid vacations, and shorter workweeks. Some of the unemployment, however, has resulted from plant closings and layoffs. In Richmond, skilled labor is reported in short supply. Unemployment of skilled workers is reported by both Boston and Chicago.

Rising prices, expectations of higher prices, and wage costs continue to plague most business respondents despite the weaker labor market. There is virtually total agreement that prices are rising and will continue to do so as labor unions continue to secure higher wages. This factor was mentioned by more than half the Reserve Banks. Cleveland specifically indicated the high construction wage settlements, which point to further increases in home prices. Price "shading" is reported by some Reserve Banks, but such practices are apparently of only limited extent. Nevertheless, cautious optimism is expressed by some that the fight against inflation is making progress, and one bank reports prospective weakness in livestock product prices in the coming months.

Reports of the Reserve Banks are varied concerning credit demands. There is increasing caution on the part of lenders with respect to both large and small borrowers. Over half the reports mention the rising concern by commercial banks for borrower liquidity. Philadelphia reports a more comfortable feeling by businessmen with respect to liquidity while San Francisco reports neither improvement nor worsening of liquidity conditions.

Although most firms are carrying out announced expansion programs, there has been a decline in new announcements. Nearly every District indicates that capital spending is expected to decline in the coming year.

Caught between wage and salary hikes and a more-or-less constant level of demand, there is increasing pessimism regarding recovery of business profits.