Judging from the District reports, the effect of the new economic program thus far has been to improve the economic outlook. Spending and production, as yet apparently largely unaffected by the new program, continue a moderate expansion. Strength in consumer spending is expected to continue. There is no sign of a marked change in capital spending plans. The loan demand outlook is mixed. There are some expectations of interest rate declines.

Several banks report that optimism generated by the announcement of the new economic program continues. However, the St. Louis Bank indicates that the original enthusiasm for the program has moderated, and the Philadelphia Bank reports that earlier optimism seems to have dissipated. Kansas City reports that some merchants think the program may be adversely affecting consumer spending. Chicago reports that the program may have resulted in an "air of uncertainty" that conceivably could delay the economic recovery.

The Philadelphia and Chicago Banks report skepticism about the efficacy of Phase II, and one of Boston's academic respondents thinks the control structure is awkward. Chicago indicates that some small firms appear to believe they can evade the controls with impunity and that large firms have almost cut off publicity on price developments.

There is some doubt about the effect of the program on prices and price expectations. The Chicago Bank reports the freeze may have aided the disposal of 1971 model automobiles at better-than-expected prices and that popular 1972 models are being loaded with high-profit extras. Philadelphia reports a rise this month in the percentage of manufacturers predicting an overall increase in prices. Dallas reports that economists interviewed indicate little hope for a reduction in the rate of inflation. A Boston director does not feel that the size of a recent wage settlement was affected by the freeze, except that the freeze delayed the negotiated wage increase. The New York Bank reports excellent compliance with the freeze, yet one of the Bank's directors warns of a "head of steam" building under wage demands.

Retail sales were most often described as strong or improving. Robust auto sales were commonly cited. Two banks report a bunching of purchases to beat post-freeze price increases. Two banks also mention that furniture sales are improving; in one case, the improvement was associated with the surge in residential construction.

Several banks mention that no early uptrend in capital spending is anticipated and that inventory plans remain cautious. However, an increase in plant location inquiries is detected by St. Louis. Also, Chicago reports an increase in design-stage activity for some types of long-lead time machinery. Capital goods producers in the Boston District report improved prospects. An academic respondent in the Boston District sees a danger that political pressure to lower short-term interest rates could result in a flood of liquidity that, in conjunction with liberalized depreciation and the investment tax credit, could trigger an excessive capital spending boom in the first quarter of 1973.

Manufacturers in the Richmond District report further increases in shipments, orders, and backlogs. Cleveland also mentioned an increase in new orders and reported that steel companies experienced an improvement in new orders in September, although orders were well below normal. Steel inventory liquidation is expected to continue into December. Philadelphia reports that manufacturers are less optimistic with respect to new orders, shipments, and unfilled orders.

Loan behavior and loan demand outlook are mixed. Several banks note moderate to strong demand for consumer and mortgage loans. On the other hand, three banks report expectations of weak loan demand accompanied by declines in interest rates.

Strength in construction was reported by several Districts, but San Francisco indicated concern over rising vacancy rates in multi- family units and Chicago indicates an excess supply of space in new office buildings. An oversupply of office space and apartments may also slow the growth of construction in the Atlanta area.