"Moderate economic recovery" capsules the views of most Red Book reports this month. Inflation and materials shortages once again seem to be major items of concern. While some reports expect a subsiding of inflationary pressures toward year's end, others expect these pressures to remain severe throughout the year. Current views on materials shortages also vary. Some Districts indicate a loosening of basic materials supplies, while other reports indicate continued shortages. Residential construction remains depressed, with strikes of construction trades making matters even worse in several Districts. Capital spending plans remain strong, though some downward revisions of capital expenditures have apparently taken place because of high interest rates, materials shortages, and the cyclical downturn in the economy. Inventory building as an inflationary hedge or because of the fear of shortages has been limited and scattered. Business loan demand remains at high levels despite high interest rates. However, there were some reports of slight reductions in demand; and lending is reported to be more selective now. Delinquencies on most types of loans are up. Consumer spending is beginning to show some life, with a renewed interest in larger autos as one area of strength. Heavy rains may cut into expected bumper crops in some Districts.

The first quarter slide in economic activity has apparently bottomed out, and a moderate economic expansion is now under way in most Districts. Philadelphia reports that the first quarter slide has ended. Cleveland, St. Louis, and Minneapolis note that economic activity is beginning to pick up and should continue to do so throughout the rest of this year. San Francisco, however, does not expect much improvement until the third quarter.

A number of Districts emphasize the growing concern over inflation. Philadelphia sees inflation as the sore spot in its economy, with price increases on manufactured items and raw materials continuing throughout the year. This view was echoed by Atlanta, St. Louis, and San Francisco, while Cleveland expects some abatement in price increases by the fourth quarter.

Though supply problems continue to exist, some easing is beginning to be noticed. Boston, Richmond, and Chicago note some loosening in supplies. However, other Districts indicate continued difficulties and longer lead times in obtaining plastics, basic petrochemicals, steel, and electrical goods.

Residential construction remains universally weak in all Districts. In Minneapolis, San Francisco, and St. Louis, strikes in the construction trades have depressed this sector even further. The Administration's new housing program is expected to have only a slight impact on residential construction. New York describes the program's probable impact as a "cushion" to a further decline in residential construction rather than a stimulus.

Capital spending continues to be the major area of strength, but some retrenchment in these spending plans may now be taking place. Boston reports some postponing of capital spending because of anticipated declines in interest rates. Reports from New York indicate "some cooling of enthusiasm" regarding expansion programs. Materials shortages are curtailing capital spending in the San Francisco District.

Inventory building because of materials scarcities is not as widespread as earlier reports indicated. Atlanta and New York note that high financing costs may be inhibiting inventory investment in many areas. Cleveland also finds some signs of inventory investment abating, and responses to Richmond's survey of manufacturers suggests that inventories may be higher than desired.

Views are mixed on the effects of record-high interest rates on loan demand. Philadelphia, Cleveland, Minneapolis, Dallas, and San Francisco indicate little letup in loan demand. However, Boston, Richmond, St. Louis, and Kansas City note a slight reduction, particularly in demand for business loans. A pickup of deposit growth at commercial banks was also observed in several Districts. Richmond's survey of large District banks, as well as information from other Districts, reveals that firmer credit standards are being applied to loan requests. Several Districts also indicate that an increase in loan delinquencies and a rise in bankruptcies are a matter of growing concern.

Consumer spending in most Districts is beginning to perk up. St. Louis and Kansas City indicate that appliances are selling well. Tourist activity is on the upswing and is expected to remain so through the summer months in the Atlanta and Minneapolis Districts. Several Districts note a pickup in the sale of larger-sized cars. Minneapolis suggests, however, that consumer resistance to higher car prices may be responsible for a more recent drop in sales.

Agricultural prospects appear mixed. Reports from a number of Districts confirm the decline in livestock prices. San Francisco' s agricultural prospects are expected to be excellent throughout the District. Rain and bad weather have affected crop plantings and prospects for crop yields in the Chicago, St. Louis, Kansas City, and Atlanta Districts.