Businessmen and bankers in the Twelfth District report a continued slow pace in economic activity. One effect of this situation is apparent in the behavior of Christmas retail sales. In most areas, retailers report relatively small increases and in some areas sales were below those of the previous year. There are reports of further cutbacks in industrial production. As a reflection of this situation, banks are experiencing a lower level of demand for loans.

Retail sales during the Christmas season did not match the increases of recent years. In general, sales were up somewhat but much of the increase in dollar terms was due to higher prices rather than a real increase in volume. By region, the most buoyant sales were in Arizona and Utah; the least were in Washington. Most of the increase seemed to be registered by the big retailers concentrating on medium-priced lines and the discount stores based in suburban shopping centers. Even here some of the increases were due to the spread of Sunday openings by regular-line department stores. Higher-priced lines, and the stores specializing in them, seemed to have difficulty in even matching last year's sales. One regional chain of high-priced women's clothing reported only a 1 per cent gain in dollar sales and there were marked declines in sales of such specialties as furs and fine jewelry. Buyers seemed to be price-conscious and more reluctant to buy on credit.

As has been the case, Washington continues to have the greatest problems. Retail sales in the Seattle-Tacoma area were described as down from 1969 and about equal to those of 1968. Delinquencies in consumer loans and mortgages are up somewhat but yet not out of line. The lumber industry, which has been a source of some support to the local economy, is experiencing difficulties in maintaining output; the largest pulp and paper mill in Tacoma closed in mid-December until sometime in January. Some smaller firms producing for the national market have had increases in orders. Overall, in the Seattle-Tacoma economy, unemployment is still high and retail sales and housing starts have fallen.

The pace of industrial activity shows no sign of increasing, and further reductions are continuing in some areas. A few of Oregon's larger manufacturers—particularly in electronics—have announced layoffs for the first of the year. In Orange County of Southern California and Arizona, industrial cutbacks are continuing. A builders' supplies firm in Northern California shut down for ten days in December to avoid further layoffs of its staff. On the other hand, copper or steel production continues to be strong in Utah. District agriculture seems to be doing relatively well. The Washington fruit crop has been selling well and local cold-storage facilities are being expanded. Similarly, farmers in Oregon have experienced a better than average year.

The slower rate of economic activity is reflected in the lower level of demand for loans at district banks. Bankers have reported improved liquidity positions and they are making changes in their asset portfolios. Some banks are increasing the average maturity of their outstanding CD's and others are now buying tax-exempt municipal bonds. As part of the national trend, they are paying lower interest rates on their CD's and charging less on their loans. One large bank reported that it has lowered the rates paid on some of its "saver-type" time deposits of one year and more maturity. More bankers are now shifting their lending policies to a more aggressive or active search for new business. Despite this shift in policy, total loans are lower both in business and in consumer loans.

In summary, consumer spending, although a source of support to the economy, has not been rising rapidly. Business activity has not been increasing, and, in consequence, businessmen are remaining cautious in their investment and production plans. The banks are in a better position to lend when demand does finally begin to increase more strongly.