A group of businessmen in the eighth district are optimistic that the business uptrend of recent months will continue through 1973. Retail sales at major department stores rose throughout the district in March. Manufacturing activity continued up, and more firms reported operations at capacity levels than a month ago. Also an increasing number have made plans for plant expansion. Construction remains at a relatively high level. Employment continues to rise. Loan demand at banks and savings and loan associations continues to grow faster than savings. Following a lull in January, seasonally adjusted retail sales by major firms in the eighth district turned up in February and continued upward through March. The rise was more widespread in March than heretofore.

Manufacturing activity continued to expand in March, and output is now approaching reported capacity levels in most industries. Typical comments were: industry is operating at full capacity, the supply situation is very tight, we need additional capacity for many items, and employment is at a peak with present mill capacity.

In the eighth district a strong upward movement in capital spending on plant and equipment is apparently underway. Plans for increasing capital investment in 1973 over 1972 levels were reported by electrical equipment, paperboard and chemical manufacturing companies. Demand for paperboard containers, however, is still expected to rise faster than the productive capacity for another two years. Industrial expansion is most pronounced in Arkansas, Kentucky, Mississippi, and Tennessee. There has been very little industrial expansion in St. Louis during the past three years.

Eighth district construction continues at the relatively high level reached more than a year ago. Residential building is at a high level throughout the district, but commercial and industrial building is quite spotty, varying from generally high in the southern portion of the district to sluggish in St. Louis. Building materials are reported to be in very tight supply over most of the district, with deliveries six months or more behind schedule in some locations. Part of the problem reflects the sharp increase in demand for freight cars which became noticeable with the step-up in grain deliveries to seaports for export. In part, however, it reflects a sharp increase in demand for raw materials such as pulpwood and sawtimber.

Employment has continued up in recent weeks, but the lack of more manpower is reported to be limiting real output in an increasing number of communities. Some of the businessmen interviewed reported that all people wanting and willing to hold a job are now working.

Bankers reported that loan demand was very high and deposit growth was slowing. Upward pressure on interest rates continues. However, those interviewed reported that quoted rates had not been increased on consumer installment and real estate loans.

Many farmers are pessimistic about planting 1973 crops as a result of the excessive rainfall and flooding in recent weeks. Some have estimated that it will require 10 days or more of sunshine after rainfall ceases and the water recedes from the flooded areas before machinery can be used in the fields. On the optimistic side, however, are the high prices for farm products and the expected high farm incomes this year.

Inflation continues to be a major topic of concern among businessmen as well as among consumers. Most businessmen foresee little abatement in the rate of inflation from the trend rate of recent years.