In the opinion of our directors, economic activity in the Twelfth District remains strong. Consumer retail spending is expected to reach record levels during December. With the possible exception of construction, most other sectors are maintaining a steady rate of expansion.

Retail sales are reported to be running at 8 to 12 percent above last year's level throughout the District. In some cases, gains of 15 percent are mentioned. The demand for consumer goods is broadly based, but it is strongest in such lines as sporting goods, bicycles, and home furnishings. Some of our respondents also think that there is a tendency to buy higher-priced lines and to upgrade in terms of quality.

A similar situation exists for automobiles. Sales are generally good throughout the District. In a few cases, demand for imported cars is described as weak, but in other areas foreign car dealers are experiencing good sales. The principal problem for domestic car dealers is obtaining deliveries from the manufacturers, and, as a result, low inventories are preventing sales from reaching even higher levels. Dealers expect this strong demand to be maintained into next year.

Construction activity is continuing to hold up, but there are more signs of weakness. Multiple unit construction is falling off because of overbuilding in many areas, but single-family construction and commercial projects are keeping overall demand steady. For example, in Seattle, construction has started on the first large downtown department store in thirty years. Current rates of construction may not be maintained, however, and one large California bank has forecast a 25-percent decrease in the state's building activity in 1973.

In California, recent court decisions requiring environmental impact studies on large projects and the passage of a constitutional amendment in November imposing controls on use of coastal areas are causing some uncertainty. A few banks are reported to be restricting construction loan funding on affected projects until the legal picture is clarified. But at the moment, even in California, construction overall is still showing considerable strength.

The timber industry is showing no signs of any slackening in activity. Lumber prices are higher, and mills in Oregon and Washington are working full time. According to one director, the demand for timber will be maintained in the coming year because of the need to build up inventories which presently are very low.

Good crops and prices are expected in most agricultural areas of the District. Fall planting has been completed, and the crop prospects for wheat are excellent. Beef prices are holding steady, although the existing levels may not cover the costs for some feedlot operations. As a result of record crops and prices in 1972, farmers are making heavy purchases of new equipment and adding to strong retail demand.

District banks report that demand for loans to support inventories is quite strong, but as yet there are no signs of a general jump in consumer installment credit demand. Some banks report record increases but others have experienced no major increase. Several bankers suggest current spending is being financed by heavier reliance upon past savings than upon credit. On the other hand, many purchases are being made through bank credit cards and the effects on credit demand will not be fully apparent until January when customers decide upon the proportion of their balances to repay.