According to bank reports, economic activity is improving and is expected to remain strong. Retail sales have been increasing and retailers expect Christmas spending to be heavy. Order backlogs are swelling in several areas as the tempo of manufacturing activity picks up; inventory building is also anticipated. Several districts report robust construction activity. Although problems are noted, the agricultural situation is termed "strong." Labor shortages are developing in some areas as the demand for workers strengthens. A moderate rate of inflation and continued gains in loan demand are expected during coming months.

The consumer spending outlook can be termed "favorable." Retailers in the New York district are optimistic about Christmas spending and those in the San Francisco district are looking for a 10 percent year-to-year Christmas sales gain. Recent increases in consumer spending are reported by Richmond, Chicago, Dallas and St. Louis. Automobile sales, however, are being held down by inventory shortages in several districts.

Reports disclose improved manufacturing activity. St. Louis reports gains in manufacturing sales and reveals shortages developing in the cement and paper industries. Boston indicates that several of its district manufacturers are operating at capacity. Capital good sales are expanding in the Chicago district and order backlogs are climbing. Increased inventories are planned by several Kansas City district manufacturers. Richmond reports that manufacturing shipments, new orders and backlogs are rising. In the Atlanta district plant and equipment expenditures continue to expand. The seasonally adjusted Texas industrial production index experienced a sharp increase in September with all major industrial sectors advancing. Philadelphia, however, indicates some leveling off in manufacturing activity.

Richmond, Atlanta, St. Louis, and San Francisco all report strong construction activity. In the Sixth District, several major commercial projects and tourist attraction expansions are planned, and shortages of building materials are evident in some areas. Although national construction activity appears to be strong, there is vacant commercial space in Seattle, and very low commercial construction activity in St. Louis. Richmond suggests that the rate of increase in building appears to have slowed; and Dallas reports that residential and nonbuilding construction awards in the district have declined.

Agriculture continues strong. It is, however, encountering some apparently temporary difficulties in certain areas and for certain products. In the Midwest, crop damage and harvesting problems were caused by unseasonally wet weather. Recent income from tobacco sales has been disappointing in the Southeast. Prices for fattened livestock have weakened. But Minneapolis describes farmers, in general, as "cautiously optimistic" and cites strengthening loan demand for farm operating investments. Dallas concurs with the optimistic description, citing very high farm receipts, and Kansas City mentions thriving agribusiness industries.

The employment picture continues to brighten, leading to increased labor shortages in some parts of the nation. Expanding demand for labor is reported by Chicago, St. Louis, Kansas City and Dallas while New York indicates that the belt tightening period has ended and labor demand is starting to build. Labor shortages especially among skilled workmen, evidenced by increased turnover and absenteeism are reported by Chicago and St. Louis. Availability of nonunion labor, however, prevented trucking and building trade unions from pressing for large wage settlements in the Chicago district.

The outlook for wage and price increases differs, to some extent, in each district that reported on inflation. With the exception o£ Atlanta, where inflationary pressures remain strong, the expected rate of inflation for next year is generally termed "moderate." This assumes that some
wage-price regulations continue through 1973. Farm prices should, in coming months, exert less upward pressure on consumer prices then they have recently.

There are mixed reports on both loan demands and deposit increases throughout the nation. A number of districts report relatively strong or expanding loan growth particularly in the business, mortgage, and consumer credit areas. In the San Francisco district, strong loan demand is reported for mortgage and consumer credit—although the strength of business loans varied throughout the district. St. Louis reports