Businessmen in the Ninth District continue to be concerned about the economy's performance, and many feel that some type of "incomes policy" will be necessary if further reductions in the rate of inflation are to be achieved. Although the District at present is free of major labor disputes, district labor bargaining is expected to be difficult in 1971, due to the large wage concessions granted in 1970. Christmas spending in the district probably equaled if not bettered last year's sales level. Reports also disclose that district consumers look for a modest recovery in economic activity next year. According to our latest agricultural credit conditions survey, district farm income and spending are depressed, and farm loan demand is high because of credit extensions and refinancing.

In response to a question on the desirability of an 'incomes policy" as a deterrent to further inflation, bank directors indicated that many district businessmen support the adoption of some type of "incomes policy." Businessmen are, however, very vague as to the form such a policy should take and generally favor some type of voluntary program and abhor any type of rigid wage-price controls. One director reported that businessmen in his area did not support an "incomes policy" for they believed that a jawboning or voluntary type program wouldn't work and that a rigid involuntary program would not be acceptable. Another director stated that businessmen in his area did not favor an "incomes policy" and felt the problem could be corrected by breaking the monopoly power of labor. Two directors reported that labor leaders they talked to were reluctant to support the adoption of an "incomes policy." One labor leader did state, however, that he would go along with wage-price controls if such a policy was broadened to include, besides wages, profits and dividends.

The settlement of the Northwest Airlines strike in early December left the Ninth District free of major labor disputes for the first time in seven months. A survey of bank directors reveals that labor negotiations are scheduled in 1971 for the mineworkers and for several construction trades. One director indicated that union membership will be hard to satisfy because of the large wage concessions granted in 1970 and that bargaining will be difficult for both management and union leadership.

District consumer spending during the Christmas season probably equaled if not bettered last year's sales levels. Consumers, however, were cautious and price conscious in their spending and tended to purchase items that were less expensive and more practical. As one director indicated, retailers who are aggressive and offered the consumer value had a good season, while those who conducted business as usual probably did poorly. Reports indicate that the sales of big ticket and luxury items were off this year. A newspaper survey revealed that reservations for New Year's Eve at Twin Cities hotels and restaurants were down this year. Automobile sales in one area of the district were reported to have improved in the last couple of weeks. Upper Michigan has excellent snow conditions this year, and its ski business is very good. Also, one director disclosed that farmers in his area recently have been shopping around for farm machinery and were making purchases if they received price concessions.

Bank directors generally report that district consumers expect economic conditions in 1971 to be somewhat better than in 1970. One director, however, reported that merchants in his area are going to take their time in rebuilding inventories depleted by Christmas buying.

The preliminary results of our January 1 quarterly survey of agricultural credit conditions reveals depressed farm income in the district a reduced level of farm purchases and a stronger than usual demand for short-term loans caused by tide-over needs and requests for loan extensions or credit consolidations. Although agricultural bankers' willingness or ability to lend has increased because of seasonal factors, the banks have abnormally high loan-to-deposits ratios. Bankers expect that in the next three months there will be even lower farm income and spending and more demand for credit extension and refinancing. Practically no agricultural bankers, however, expect any difficulties in meeting credit-worthy loan requests in the next three months. The survey also revealed that a significant number of bankers in the district's corn and small grains producing areas expect the new farm program legislation to adversely affect farm income during the 1971 crop year.