Tenth District business continues to improve, with manufacturers planning to increase inventories further in anticipation of more sales growth. The breadth and strength of economic activity is indicated by revenue gains and optimistic outlooks of almost all major district firms contacted, a sample representing a wide variety of products sold across the country and overseas. With strong business and consumer loan demand at commercial banks, and an indication of some flattening of deposit growth, some interest rates have risen and district bankers expect further increases in short rates. Changes in Regulations D and J continue to concern bankers, while businessmen are worrying about the upcoming heavy calendar of labor contract negotiations and their impact on costs and prices.

Most Tenth District bankers report moderate growth in demand deposits. Trends in time and savings deposits are mixed, with some banks experiencing strong growth and others reporting essentially no change. Most banks have increased rates on certificates of deposit, in some cases to the Regulation Q maximum. One bank has already noted a slight outflow of CD money as a result of the recent rise in competing market issues. Most bankers anticipate a further rise in short-term interest rates over the coming months, with some anticipating significant disintermediation as a result.

Demand for loans in all major categories has been strong at most district banks. No leveling in construction loans is evident as yet, though some bankers expect such leveling in coming months, particularly due to seasonal factors. Demand for business and consumer loans continues strong.

District bankers express considerable uncertainty about the effects of changes in Regulations D and J on deposit levels. Officials at several banks expect an adverse impact, but one large bank is sufficiently confident of a 2 to 3 percent increase in deposits and is already extending loans on the basis of the anticipated rise. Even those bankers contacted who anticipate an adverse effect on deposit levels expressed approval of the changes in the regulations.

Several manufacturers plan to increase inventories. Their intentions reflect improved sales outlooks, desires to provide cushions against lengthening lead times for raw materials, and efforts to improve customer service. Other manufacturers, including some who overestimated sales in recent months, feel their current inventory levels will prove adequate for expected sales increases.

Agribusiness is thriving, thanks to record farm income. Firms selling supplies to farmers report sales increases up to 20 percent over last year. The favorable high price and high production situation includes the sugar beet industry, and two major sugar refineries expect substantial revenue increases this year.

Reviving private demand and new government contracts have pulled the cyclically sensitive Wichita economy up from an 8.1 percent unemployment rate a year ago to its current 4.3 percent level. Wichita's private airplane manufacturers—a key industry in the city—report very good business and expect 1973 to be equally strong or better.

The improvement in general business conditions nationwide is also reflected in current sales and optimistic expectations of several other types of Tenth District firms with extra-regional markets. Consumer-oriented firms include a manufacturer of luggage, a large nursery, two big manufacturers of rubber products, a large manufacturer of small home appliances, a leading greeting card company and a manufacturer closely tied to the auto industry.

Producer-oriented manufacturers, including giant truck, steel drum and water-cooling tower firms, generally have experienced a somewhat less impressive sales increase over last year than have manufacturers of consumer products. But most are optimistic about sales prospects in the months ahead.

Publications and contacts in the district report an excellent summer tourist season. A good winter sports season already has begun. The recreational land boom continues.

While a discouraging word was seldom heard, a few respondents, ranging from a machine tool manufacturer to a manufacturer of snack foods and one of plastic bags, reported sales not much improved over last year. The worst expected, however, was another year of the same.

Several nonbank businessmen also were asked about their expectations regarding inflation and interest rates and their choice of a continuation or end to wage and price controls. The responses on interest rates were too mixed to permit a conclusive prevailing opinion. As to the price level, most say the bargaining ahead, and the controls applied, will determine the outcome. While two want controls ended and replaced with antitrust action against unions, the others feel some controls must be maintained.