Economic activity in the Eighth Federal Reserve District has continued vigorously upward in recent weeks, according to a selected group of businessmen. There is a rising wave of business optimism. Sales continue to rise on a broad front. Manufacturing activity continues to expand, and more industries report their operations are approaching capacity levels. From the businessman's viewpoint, labor markets are tight in most of the district. Employment still trends upward, and the unemployment rate is down. Construction remains at the relatively high plateau attained more than a year ago. Financial institutions report a vigorous loan demand and large savings inflows. Long-term interest rates remain relatively stable, but upward pressure on short-term rates continues.

Sales of goods and services in recent weeks have apparently continued up at about the trend rate of the past year. Retailers report further moderate gains on a seasonally adjusted basis. Manufacturers also report further increases in sales during the third quarter. Some items, including cement and paper, are reported to be in short supply. In addition to developing paper shortages, the packaging industry reports the quality of paper delivered is more varied and less dependable than earlier in the year.

Vigorous expansion in manufacturing activity is reported throughout the district. Paper, construction materials, metals, textiles, food processing and chemical firms all report operations at a relatively high rate of activity. A representative of a large diversified cigarette manufacturing company reported an increase of 17 percent in sales and 10 percent in employment from year ago levels. Representatives of both paper and cement industries report their industries are operating at capacity. A representative of the packaging industry reported that unless expansion of kraft paper output occurs, rationing will soon be necessary and that there is no incentive to expand capacity at current price and profit levels.

Employment expansion continues and more communities report a shortage of labor in all skill groups. Additional workers have been added to payrolls in recent weeks throughout the district. An Arkansas representative reports that the local labor force is fully employed, employee turnover is becoming critical and most Arkansas plants are trying to add to their labor force. In a few areas of the district, such as southern Indiana and St. Louis, where some unemployment pockets remain, employment has picked up and the unemployment problem has become less severe.

Excluding the St. Louis area, both residential and commercial construction continue at the relatively high rates of the past year. Residential construction is at a high rate in the St. Louis area, but the construction industry here remains somewhat depressed because of a very low level of commercial building.

Commercial banks and savings and loan associations report continued strong demand for loans, with some slackening in savings inflows in recent weeks. Demand for mortgage loans remains vigorous, but mortgage interest rates remain about unchanged from midsummer levels. Commercial loan demand is expanding and upward pressure on commercial loan rates continues.