The predominant view of businessmen and bankers in the twelve Federal Reserve Districts is that the economy has not yet returned to a faster rate of expansion. There are both elements of support for further expansion and of weakness. For example, consumer spending is being maintained in most areas, yet the rate of increase is below that achieved last year and expected sales targets are not being achieved. Construction activity also remains at its current levels with
a mixed picture of good demand in some areas and poor in others. The situation in capital goods seems to have stabilized with few cases of further reductions being mentioned, although there is little evidence of a general recovery in capital expenditures. It appears that business men are waiting for stronger evidence that the economy has begun its recovery.

A major source of uncertainty concerns the future course of the General Motors strike. The immediate impact is currently greatest in the Chicago and Cleveland Districts, where unemployment is rising as a direct consequence of the strike. Industries supplying the automobile industry are also beginning to be affected; glass, tire, and steel production is being cut back. In the other Districts, there have been some increases in unemployment in areas with GM assembly plants and some reports of reduced auto sales, but the repercussions for the moment have been small.

Other labor disputes are creating problems: in Kansas City with a drawn-out construction strike and in Minneapolis with the Northwest Airlines strike. Businessmen and bankers in other Districts remain concerned about continued wage increases, especially in the construction industry, and, according to a report from the Chicago District, the "huge number and variety of demands by the unions." On the other hand, there are signs of a moderation in union demands noted in the Boston District.

Unemployment continues to rise both as a consequence of the GM strike and layoffs in other industries. Among the other industries reported as having further reduced their work forces are machine tools (Cleveland, Boston), furniture (Richmond, Atlanta), textiles (Richmond, Atlanta), and metals (Richmond, Chicago). Aerospace employment continues to be low and to be the major depressing influence in such cities as Seattle. There are offsetting forces in other industries which are expanding. In particular, companies in coal mining, railroad-car and large truck parts report growing sales.

Capital expenditures show little sign of recovery in prospect. Most Districts report that few large projects are being planned until there is a stronger recovery. Current capital expenditures are being stretched out or delayed. Similarly, other costs are subject to close scrutiny. Inventory reductions have not quite ended. There are reports from the Richmond, Chicago, and Philadelphia Districts that indicate there is little sign of a shift toward a building-up of inventories.

The construction industry is still maintaining its overall volume but with considerable variation in the pace and type of local activity. In general, nonresidential construction remains strong. The major weakness in most areas is in residential, particularly single-family homes. There has been a slight increase in the availability of mortgage funds in some areas, but not in others. There has been little or no reduction in mortgage rates.

Consumer spending has been maintained but it seems to be below retailers' expectations in most areas. There are some exceptions—for example, one major New York City department store reports a steady improvement and tourist expenditures are heavy in the Boston District. The net impression is that in most Districts retail activity is only at a moderate rate.

Agricultural trends suggest the possibility of higher food prices. The effect of heavy rains and the spread of corn blight point toward a reduction in some crops, which will tend to push up prices. The corn blight has seriously reduced the corn crop in the Kansas City District but apparently has caused only a minor reduction in the crop in the St. Louis District. Nonetheless, the expectation is that the reduced supply of cattle feed will tend to push up meat prices in the future.

The Dallas District reports that a survey of thirty-one city and county finance offices indicates a continued increase in local government expenditures and borrowing in the coming year.

The financial situation has moved toward greater ease. Most banks have experienced an inflow of deposits. The banks in some Districts are making somewhat more business loans but without any substantial change in their lending requirements. In other cases, the banks used the funds to rebuild their liquidity.