The overall impression that emerges from the individual District Red Book reports is one of continuing improvement in the economic outlook. Consumer spending is apparently on the rise, with indications of heightened interest in nonessential or postponable goods and in both big ticket and higher priced items. New orders, shipments and backlogs of industrial goods are reportedly strengthening, while business confidence is improving noticeably. These favorable developments, however, have not as yet been translated into a significant turnaround in the cautious inventory policies of businesses, and are still reflected only to a moderate extent in actual or planned increases in outlays for plant and equipment. Similarly, the increase in sales and production has not as yet found its counterpart in a sharp rise in the demand for labor, although it has reportedly led to a limited improvement in the unemployment picture.

With respect to consumer spending for goods and services, evidence of strengthening of consumer confidence can be discerned in reports to the New York Bank of increased purchases of nonessential goods and of big ticket items, and the fact that sales of durables are much more vigorous than those of nondurable goods in the Chicago area, with recreational vehicles such as motorcycles, golf carts, snowmobiles and similar items leading the field. In addition, several banks report a sharp uptrend in passenger airline traffic and Atlanta reports booming tourist business in Florida. And while sentiments were mixed in the Philadelphia District, retailers are expecting sales of home furnishings to be strong as a result of the high level of housing completions in the area. A note of caution, however, was sounded by some San Francisco bank respondents who questioned whether consumer spending would become much stronger.

Concerning construction outlays, most District reports referring to activities in that industry and/or related industries, indicated that residential, and in some cases (Atlanta) nonresidential construction, continues to be a strong element in the current economic recovery. Some banks, however, including San Francisco, Chicago and Boston, report some feeling among their respondents that a leveling-off in the industry is probably in the offing.

As for industrial activity manufacturers participating in the Philadelphia monthly Business Outlook Survey report a further pickup in new orders and shipments in February, which is expected to accelerate in March, while Chicago manufacturers of TV sets, furniture and home appliances are said to be very pleased with the trend of sales. Increases in varying degrees in orders, shipments and backlogs-often linked either to a rise in consumer demand or to strong construction activity-are also mentioned by several other Banks, including Richmond and St. Louis. The Dallas Bank notes that the Texas industrial production interest rose to a record level in January.

Despite the apparent strengthening of the economic recovery, District reports, however, generally note that businessmen are still maintaining cautious inventory policies at this juncture, and that no significant turnaround in such policies is indicated for the near future. The current inventory picture is well summed up by the results of the latest Minneapolis Industrial Expectations Survey, which indicate that nearly three quarters of the responding manufacturers considered their inventory positions to be satisfactory, with the balance equally divided between those who considered their inventories too high or too low. Similar sentiments were expressed by several other banks, although Chicago reported that an increasing number of firms showed concern over the adequacy of their inventories to meet rising demands.

Concerning business outlays for plant and equipment, Philadelphia reports that an increasing number of area manufacturers are planning to boost capital outlays, with firms contacted that planned increases outnumbering those planning cut-backs 10 to 1. Atlanta reports that previously postponed capital improvements at airports and other nonresidential projects will now be implemented. Cleveland notes that truck production and sales were at record levels, while both the Chicago and New York Banks saw evidence of a sharp rise in agricultural capital spending. On the other hand, St. Louis notes that capital expenditures are being delayed as long as possible, as its business respondents express reluctance to make major investments in view of the uncertainties surrounding profit prospects, and San Francisco reports a conservative attitude by local businessmen toward new capital investment.

Regarding the unemployment picture, reports vary among the District banks, but on balance suggest some limited improvement. Richmond thus reports sharp increases in manufacturing employment, as well as a substantial rise in the trade and services industries. The Philadelphia and New York Banks both had evidence that some firms were adding to their payrolls, while the Dallas Bank indicated that a rise in employment, notably in the construction industry, had lowered the jobless rate in the District to its lowest level in more than a year. According to reports to the Atlanta Bank, unemployment was " low" in East Tennessee, and scattered improvement was seen elsewhere in that District. There has also been some increase in employment in the lumber industry in the San Francisco District. The Cleveland Bank notes a continued small recovery into January in non-farm employment, but expects no major improvement at this time. Similarly, Chicago notes that employers have been very cautious in increasing their work force, and St. Louis reports that apart from some gains in the construction and service trades, additions to payrolls are being delayed.