Comments from the District banks uniformly emphasize the strong pace of the current economic expansion. Near-term prospects for both consumer spending and business investment continue to be excellent. Strong income gains in the agricultural sector are bolstering retail trade and outlays for farm machinery and equipment. Construction remains at a high level in most Districts. Signs of overbuilding in certain areas, however, suggest an adjustment in 1973. Labor market conditions generally continue to show improvement, and some Districts are experiencing labor shortages. Businessmen and economists expressed concern over the possibility of renewed inflationary pressures in 1973, and over what public policy measures might be taken to counteract those pressures. Reports were mixed on the effectiveness of wage-price controls and their future prospects. Commercial banks are experiencing strong loan demand, especially from the consumer sector.

Concern about the reemergence of inflation during 1973 was the most frequently mentioned problem on the economic horizon. Banks specifically commenting on the problem of renewed inflation include Boston, New York, Philadelphia, Cleveland, and St. Louis. On the subject of controls, Atlanta mentioned that businessmen are concerned about the inadequacies of wage-price controls, while St. Louis reported reservations among businessmen regarding the future effectiveness of controls. A comment picked up by New York was that continued wage controls (but presumably not price controls) seem to be a "necessary evil" if the problem of cost-push inflation is to be solved. Chicago underscores the effectiveness of Price Commission rulings in many industries, and business economists in Cleveland maintain that sentiment among large firms is for a continuation of controls next year.

Banks generally reported that retail sales continued to register strong growth in recent weeks. Higher livestock and grain prices have contributed importantly to retail trade in Minneapolis and have stimulated sales of farm equipment. Chicago, Kansas City, Dallas, and San Francisco also commented on bright agricultural income conditions. In Richmond, however, the gain in agricultural income is below the national average.

There are signs that the upswing in business fixed investment is gaining momentum. Philadelphia reported businessmen's plans for capital spending are being stepped up, while Richmond noted an increased number of manufacturers whose current plant capacity is too low relative to desired levels. Atlanta mentioned heavy capital spending on projects for pollution control and that investment is being undertaken primarily to reduce costs rather than to increase capacity. In Chicago, excellent consumer demand for recreational vehicles has spurred producers to expand capacity. Farm machinery producers in the Chicago District are pleased with domestic and foreign demand and plan to operate at a higher level than normal during the winter. San Francisco sees plant and equipment spending rising strongly in 1973, with heavy outlays required for pollution control.

On the financial sides, commercial banks are experiencing strong loan demand, particularly for mortgages and consumer credit. Business economists in the Cleveland District do not expect a credit crunch to materialize in 1973, although they anticipate some edging up of interest rates. In Kansas City, bankers are concerned about the possibility of disintermediation. San Francisco reports that banks are reasonably liquid and in a position to meet increased loan demand without major increases in interest rates.