Reports from the twelve Federal Reserve Districts indicate that there has been no material change in economic conditions. Output and employment appear to have leveled off after recent declines and, despite some optimism that a recovery will begin later in the year, the overall impression is that economic activity is at much the same level as the previous month. Price rises are still expected to continue, though at a lower rate, and employment to increase relatively slowly.

One reason for the lack of an immediate recovery is that consumer spending has not picked up uniformly. In most districts, consumers are still cost-conscious, responding to sales, but not willing to make new major expenditures. At best, retail sales are described as "more buoyant" (New York) and, at worst, "sluggish" (Dallas). But more common are reports that "sales are slightly ahead of last year" (St. Louis) or "reasonably good" (Kansas City).

Automobile sales in particular are not strong. In many Districts, they are disappointing and below what was expected after the settlement of the General Motors strike. Demand is concentrated in the lower-priced compact and subcompact models, and there is no expectation of a boom year for new car sales in 1971. Only in the Richmond and St. Louis Districts are sharp increases reported and, in the former case, the increase is a recovery from the strike- induced slump.

The lack of strong demand is reflected in automobile production. General Motors has reduced overtime schedules and the other automobile producers are operating at reduced levels.

Manufacturing shows no sign of a general recovery. There are industries which report a rise in output (containers, furniture, steel, some machine tools, and textiles), but other industries are still retrenching. Although major layoffs of workers are occurring less often, companies are continuing to reduce their workforces through attrition or unpaid holidays. Increased hiring is still not widespread. Investment plans similarly are restrained and expenditures on capital equipment in 1971 are expected to be at about the same level as last year.

Even rising new orders for steel are not a reflection of an upturn in the economy but rather represent hedging against either a steel strike or further price rises. According to steel industry economists, overall production for this year will not be above last year.

There is one sector which has favorable prospects for recovery. The demand for residential housing is picking up and sales of existing houses are increasing. Nonresidential construction is not as strong at the moment, and in many areas it is quite weak. But the net effect is to increase demand for the output of the building- materials industries and timber. In the San Francisco District, companies in these industries are already beginning to expand production and make heavier capital expenditures. An important factor in this expected recovery is the fall in mortgage rates.

The lower mortgage rates are part of the general decline of interest rates. Nevertheless, the slow-pace of overall economic activity has meant that demand, particularly the demand for business loans, has not responded to the lower rates. Banks are continuing to lower the rates they pay for funds. CD rates have already fallen in line with other market rates, and many banks are not looking for time deposits. Rates have been cut on savings-type certificates in such Districts as Philadelphia, Atlanta, and San Francisco; in the Chicago District sales of these certificates have been restricted or eliminated. There is pressure on passbook savings rates and some bankers advocate the lowering of rate ceilings for savings accounts.

Wage increases are still common and retail prices are continuing to creep up. But there are reports of price cuts (nonferrous metals, for example), and price shading (plastics, some oil products, and transformers), while other prices are higher (building materials and farm products).

Forecasts for the coming year of business and academic economists reported by Cleveland and Boston are for a GNP below that forecast by the Council of Economic Advisers. The CEA has forecast a GNP of $1,065 billion for 1971; the other forecasts reported were $1,045 billion by Cleveland and $1,047 billion by Boston. The economists' view on unemployment were also more pessimistic than those of CEA. The general view of bankers and businessmen is that rising prices will continue to be a problem for the rest of the year without much easing of wage pressures or any major increase in employment.