Notwithstanding the pervasive concern over the energy situation, District reports on balance point to a sustained high level of industrial activity as strong demand-with the exception of some consumer goods-generally continues in evidence. Weak spots so far by and large have been concentrated in regular or large-sized auto sales, airlines and aircraft manufacturers, residential construction, and, to some extent, recreational business. Largely reflecting developments in these sectors, some softening in the employment picture appears in the offing, though current industrial production and manufacturers orders and backlogs remain at high levels. However, much concern was expressed over the obstacles to further growth presented by the wide variety of growing shortages of materials in addition to petroleum products. Moreover, many respondents felt that the abatement of inflationary pressures was not in the cards for the immediate future. Increasing doldrums in the residential construction industry were also noted in some Districts, primarily as a result of high mortgage rates and the high cost of new housing. Strong demand and high prices were expected to stimulate increased agricultural production in 1974, though such an increase might be inhibited by fuel and fertilizer shortages.

District respondents generally continued to express serious concern over the potentially adverse effects of the anticipated energy shortage and the rise in oil prices. However, the main thrust of the "energy crisis" in terms of output and employment so far appears to have been concentrated on a relatively few, albeit significant, economic sectors, in particular, according to the District reports, the automobile and related industries, airlines and the aircraft industry, and in some areas tourism. The plastics and petrochemical industries have also suffered from shortages of raw materials. However, as noted by Boston, growing shortages of supplies other than petroleum products appear more critical at this time to current production, leading to accumulation at manufacturers of virtually completed products, ranging from aircraft to ovens, for want of a few parts. Indeed, concern over such shortages is mentioned in virtually all District reports. Thus, Chicago succinctly sums up the situation as one where so many different materials and components are in short supply that a list could be constructed almost at random, with shortages of castings, forgings, bearings, steel, nonferrous metals, plastics, all fuels, and paper probably being the most prominent. Cleveland also reports that purchasing agents in the Cleveland area find virtually everything they buy in short supply, with increasingly long delivery time, and that the steel industry continues to operate at full capacity despite some cutback in orders from the auto industry. Dallas reports a dearth of drilling rigs, pipes and other products involved in petroleum output, with little or no relief in sight over the next few years. Against this background, there were frequent reports of business efforts to stockpile, of "double ordering", and in some instances of budding black markets and of sharp price increases.

Despite the uncertainties surrounding fuel and material supplies and the price situation generally, most District reports pointed to a continued strong business plant and equipment picture. Among others, business respondents in the Dallas, St. Louis, and New York Districts indicated they had no intention at this time of changing their current plans for increased capital outlays. Philadelphia reports that many manufacturers in that District expect to increase their capital expenditures in the coming months, and San Francisco notes that capital expenditures remain at a high level, as business continues to modernize or expand capacity to meet expanding demand. Cleveland points to strong new orders for machine tools, and to a high level of backlogs in that industry, while Chicago reports that producers of a wide variety of capital equipment indicate that the very strong demand for such equipment that had prevailed since early 1973 or late 1972 continues unabated.

The consumer spending picture is somewhat more mixed, although with the exception of sales of autos-and, in some instances, of other durables-on balance still appears strong. In part, this strength may reflect anticipatory buying, which was mentioned by Cleveland and New York. A number of Districts, including Minneapolis, Chicago, San Francisco, and Richmond, report that retailers have generally enjoyed a high level of sales over the holiday season, in some cases exceeding expectations. Atlanta, however, notes that increased consumer cautiousness may have kept a "good" Christmas season from being a "great" one, while a mixed consumer spending picture emerges from Cleveland. A slowing down in department store sales of postponable items is mentioned by Philadelphia, while St. Louis also reports a slowdown in consumer purchases, reflecting in part a sharp drop in auto sales, and perhaps the unusually bad weather conditions in that area.

Regarding the employment situation, a number of Districts, including San Francisco, Minneapolis, St. Louis, Chicago, Atlanta, and Richmond report some laying off in industries directly affected by the energy crisis—notably in the auto, airline, and aircraft industry-but otherwise in general see little evidence that this trend is becoming more widespread at this time. Manufacturers in the Kansas City District expect employment to hold up well in 1974, but some manufacturers in the Philadelphia District expect laying off workers by next summer.