District reports present a mixed picture, with elements of weakness generally overshadowing those of strength. There are scattered indications that shortages and bottlenecks are breaking up in some sectors, although shortages of certain industrial goods remain critical. Many firms have been critically reexamining their capital spending plans, and some have scaled back such plans, not only among public utilities but in some other sectors as well. Similarly, more cautious inventory policies seem to have been adopted by some firms. Consumer spending on appliances continues sluggish, but demand for the remaining 1974 model automobiles appears to have strengthened. Residential construction continues to languish. Inflation remains a serious concern, especially in light of recent estimates of a significant drop in the expected harvest of certain key agricultural commodities.

Regional differences in the state of overall economic activity were reflected in the District reports. Economic conditions were characterized as mixed by Cleveland and Atlanta and as showing "marked contrasts" by Chicago. Activity was described as sluggish and slowing by Philadelphia and Richmond, respectively, while Minneapolis reported that prospects were not as promising as earlier in the year. On the other hand, manufacturing activity was reported strong by St. Louis and San Francisco, and Dallas reported that factory orders are generally running ahead of year-ago levels.

Capital spending plans are being subjected to increasingly critical scrutiny, and some cut-backs were reported even outside of the public utility sector, where deferrals and cancellations of capital investment projects are widespread. Among others, Philadelphia and Richmond report reluctance on the part of manufacturers to increase such outlays, with some manufacturers planning some cut-backs. Cleveland reports some softening in new orders for machine tools. On the other hand, Chicago and St. Louis report continued strong demand in the capital goods industry, and San Francisco reports that business investments are heavy.

As in the case of capital spending plans, inventory policies have been under reexamination. The emergence of more cautious inventory policies on the part of businesses was reported by a number of banks, including New York, Philadelphia, Cleveland and Richmond. Some easing of shortages was reported by Chicago and Cleveland, although Cleveland also noted continued intense demand for steel and desperate attempts on the part of industrial firms and utilities to stockpile coal. Shortages were reported to be continuing to hamper output in the San Francisco District.

Several banks reported that residential construction remains in the doldrums. Other types of consumer outlays appear sluggish for the most part, although Richmond noted a rebound in retail sales and San Francisco characterized such sales as "good". A number of banks reported weakness in sales of big-ticket items such as furniture and appliances. On the other hand, several banks, including St. Louis and San Francisco, observed a strengthening of automobile sales.

Despite the apparent slowing down of business activity and the reported easing of supply conditions in a number of industries, concern over inflation continued to be expressed by many respondents. These fears have been heightened by recent reports of prospects of significantly lower harvest of certain key agricultural products, notably corn and soybeans, than expected earlier in the year-a situation described in detail by Minneapolis and Kansas City and referred to by several other banks. Agricultural conditions were reported to be more favorable in several Districts, including Richmond, Atlanta, and San Francisco.

The demand for bank credit generally continued strong. The adoption of tighter bank lending policies, which in some instances may have helped contain the expansion, was mentioned by several banks, including Dallas, Philadelphia, Minneapolis, and New York. Thrift institutions were widely reported to still be losing deposits, and to have been especially adversely affected by the recent Treasury sale of 9 percent notes in denominations as low as $1,000.