Businessmen in the Eighth Federal Reserve District report vigorous economic growth. Retail sales at major stores continue up on a seasonally adjusted basis. The construction industry maintains its high rate of activity established late last year. All types of manufacturing are expanding. Employment continues to expand, and shortages of qualified labor are reported on a wide front throughout most of the District. However, fears that inflation is likely to accelerate in the near future have increased. Demand for credit is rising rapidly, causing upward pressure on interest rates. A larger number of firms are now planning for additional capital investments. However, there appears to be less optimism than during the summer that the inflation is under control.

Major stores report a sharp increase in sales during recent weeks. Part of the gain is attributed to cooler weather, but part is attributed to generally rising consumer demand. Stores in the central cities were losing sales and operating at a loss last year and early this year, but reports indicate that sales in these stores have now stabilized and they are operating at a profit.

Construction continues at a high rate throughout the District with the exception of the St. Louis Area, where excessive labor costs and numerous labor disputes have been a significant retarding factor. In most of the District, construction activity and output in the lumber industry is at 100 percent capacity. Directors of the Little Rock Branch report that in a recent week there were 110 job openings in Stuttgart for unskilled laborers and only four jobs were filled. They further reported that excess demand for building materials is causing prices to rise to the top of the permissible range. Suppliers of building materials are unable to keep pace with demand, and allocation by rationing has resulted. Current brick orders are for spring delivery. Prices in the future market for plywood and lumber have jumped the permissible percentage on opening trade in recent months.

Manufacturing in the District continues to expand vigorously on a wide front. Production of capital goods such as machinery, big motors, and power transmission is picking up. Production of plastics, fibers, and agricultural supply manufactures is also higher in recent weeks than heretofore.

Employment expanded further in recent weeks at most reporting firms. A shortage of qualified labor is developing on a wide front throughout the District. Department stores in St. Louis report that good labor is hard to get despite the fact that the City still shows a relatively high rate of unemployment.

Lending agencies report that demand for loans is rising, while the rate of savings remains unchanged. Negotiated CD rates have moved up in recent weeks, but inflows of savings are still at a lower rate than credit extension. Large St. Louis banks recently announced a prime rate increase, but upward pressure on most rates continues.

Concern for inflation, which had subsided somewhat earlier in the year, is beginning to revive. A larger proportion of respondents expressed reservations as to the future of wage-price controls in view of the rising demand for and higher prices of goods and services in the uncontrolled sector. In many instances, the increased prices in the uncontrolled sector become higher input costs to the larger firms in the controlled sector of the economy.