The economic outlook in the Seventh District, as indicated by views of lenders, manufacturers, retailers, and farmers, is almost universally ebullient. The last residuals of recession psychology appear to be evaporating. Expectations of further substantial gains in activity in 1973 are very widely held. Margins of unused resources of facilities and manpower are shrinking, and many industries are operating at effective capacity. Inventories are uncomfortably low in both hard and soft goods lines. Residential construction is the only major sector that appears likely to show a decline in 1973, and overall, such a decline may be small in total. The extent of crop losses because of adverse weather remains uncertain.

Fourth quarter retail sales are heading for a record by a wide margin. Purchases of luxury goods and big ticket items are especially strong, and customers are using credit freely. In some cases, low inventories are impeding sales.

Hiring is increasing at all levels including managers, professionals, and manual workers—both skilled and unskilled. Staffing second and third shifts and filling dirty or hard jobs are more difficult. Among the trained workers in short supply are accountants, experienced engineers, welders, pipefitters, and machinists. Employers report higher labor turnover rates and increased absenteeism.

With ample evidence of a substantial improvement in the job market, the problems of central cities continue to increase with high levels of joblessness (not necessarily "unemployment" as defined) and growing welfare rolls.

Producers of both cars and trucks expect gains in output in 1973 from record levels in 1972. Long waiting lists exist for various models of cars and trucks. Plans for capital expenditures are being accelerated by motor vehicle companies.

Other industries operating at virtual capacity are foundries, forge shops, bearings and other parts and components, lumber, gypsum board, color television, furniture, recreational vehicles, petroleum refining, paper, some basic chemicals, machine tools, and important types of construction machinery. Some plants have been taken out of production in recent years, and some operations have been scaled down for one or more of the following reasons: cost cutting, consolidation of operations, pollution standards, OSHA rulings, and foreign competition.

Shortages, or incipient shortages, are reducing the desire of some companies to compete actively for new business or take on new accounts. Some are shifting production to the "top of the line."

Prospects for a substantial rise in total capital expenditures in 1973, including manufacturing buildings, appear excellent. Consulting firms that specialize in product development and long-range planning report sharp increases in new business in the past month or two, after a long dry spell.

Shortages of natural gas and fuel oil are developing in the face of a very cold winter thus far. Local experts view the petroleum outlook very seriously and are predicting rapidly growing dependence on foreign sources with a large adverse impact on the balance of payments and the domestic price level. Reports of the enormous LNG deal with Russia are viewed skeptically.

Because of pressure to keep production moving, some producers complain that quality control problems have increased. At the same time, warranty coverage is being extended, and consumer-oriented legislation is highlighting the need to avoid defects.

Accountants are disturbed by the steps some business firms are taking to avoid reporting profit margins in excess of the guidelines. These practices are said to resemble those that developed when excess profits taxes were in effect.

The extent of losses of corn and soybeans caused by adverse weather is still uncertain. Muddy ground is now frozen hard, but recent snows have impeded harvests. Nevertheless, actual losses may yet be quite small overall. Even if a substantial shortfall occurs, the total effect on farm income may not be adverse because of higher prices. About three-fourths of the Russian-bound grain is not yet shipped from U.S. ports. Attempts will be made to move the grain before export subsidies expire next May. In general, the atmosphere in farm areas is the most prosperous in many years.