The business upsurge continues in the seventh district. Virtually all industries and areas are participating. Reports of shortages—raw materials, supplies, components, and skilled and trainable labor—are spreading. The rise in employment has accelerated and is expected to continue. Upward pressures are building on wages and salaries. Except for products and services of large firms, prices appear to be rising at a faster pace. It is generally expected that monetary policy will not be so severe as to cut off the expansion of 1973.

The tightening of the labor market in this region since the turn of the year has been striking. Labor turnover has increased rapidly, causing some managers to "double up" on requisitions. Job hopping has increased especially for those who had been held back for two years by lack of alternatives. Night shifts are often undermanned, especially in large cities. Steel firms in the Gary area are sending recruiting teams to other areas for the first time in many years. Firms with reactivated apprenticeship programs complain that it is hard to get men to stick. Informed observers expect the typical labor settlement this year to increase compensation 7.5 percent on average. Cost-of-living adjustments and dental benefits will be sought in several negotiations. The UAW is pushing "voluntary overtime," a change which motor vehicle, farm and construction equipment producers maintain would drastically increase their costs. Insistence on voluntary overtime could lead to a "collision course."

The capital expenditure boom appears to be in its early stages. Order lead times for some equipment have stretched out to four or more times last year's quotations. (For example, certain machine tools that had been available in six months now require a two-year wait.) Some manufacturers of hydraulic excavators, materials handling equipment, and moveable cranes have stopped taking orders (presumably because of the need to quote firm prices). Some equipment assembly operations have been slowed to await missing parts.

Some firms, large and small, are weighing decisions on expansion projects that require new buildings. One large firm has extended its planning horizon on capital outlays beyond 1974, even though a business slowdown is assumed likely for early 1974.

The steel market is running away with new orders far in excess of capacity. (Doubtless, some panic buying is occurring.) Estimates of shipments for 1973 have been raised to 103 million tons or more. One large Midwest steel producer has stated that it has started a program of "controlled order acceptance," a polite term for "rationing." Steel importers are seeking U.S. sources. The price differential on imports has narrowed or vanished, and availability has been curtailed.

Oil companies insist that price controls are hampering their operations and are intensifying shortages, especially in attracting supplies to areas of stringency. Fuel shortages in the Midwest are said to be the "worst in the world" because refining capacity is not sufficient here to satisfy demand, and because direct access to imports is limited. No new refineries are under construction, and prices of imports equal or exceed U.S. prices. Most major oil firms are restricting sales of gasoline by refusing new customers and by placing a ceiling on sales to customers. Some large oil firms that do not have refineries in the Midwest are shrinking their dealer organizations here.

Agricultural loans of large Chicago banks are double year-ago levels, mainly because of larger loans to cattle feeders and for grain storage. (Transport bottlenecks have delayed grain shipments.) Supplies of fertilizer are limited. Reports tell of shortages of farm tractors with order times on the popular larger tractors out to six months.

The meat boycott apparently reduced meat sales substantially last week, but there has been little effect on prices. Several district packing plants have sharply reduced operations. Farmer's withholdings of animals could cause heavy marketings in the next few weeks.

Permits for new housing units in the Chicago area were far above last year's high level in January and February. Apartments were especially strong, but home permits were also up. Some builders are said to be cutting back on plans because of shortages of materials, especially lumber. Premium prices are being paid for lumber, well above announced increases. Conventional mortgage rates have gone from 7 to 7 1/2 percent in the Chicago area in the past six weeks. Savings inflows to S&Ls have slowed from last year's record volume.

Business loan demand at banks remains very strong, beyond expectations at the start of the year. Large banks would like to cut off the shift from the commercial paper markets, but are not always able to tell which loan applications are involved. Starting in February, life insurance companies experienced a sharp rise in net disbursements on policy loans.