Virtually all sectors in the Seventh District are continuing to report rapid gains in orders, output, employment, sales, and profits. In many cases, these increases have been well above earlier projections that had been deemed optimistic. Many businessmen view the strength of demand as excessive and unhealthy. Output would be higher in a wide variety of hard and soft goods lines were it not for capacity and manpower limitations. Although meat prices have edged down, almost all other prices are rising and are expected to rise further. Capital expenditure plans are being revised upward. Some observers expect a slowing in economic growth in the second half, but these views are not generally supported by information on shipments and orders. Field conditions have slowed plantings to a marked degree. Business loan growth has eased significantly, but, overall, demand for credit remains very strong.

Two exceptions to the extremely robust picture are motor home output and airline traffic. The largest producer of motor homes (in Iowa) has cut production sharply because sales, although substantially above last year, have been below expectations. (This development is not to be confused with the situation in mobile homes where, in contrast to weakness expected by some analysts, shipments have been far above last year's record.) A major airline finds that growth in traffic this year has only been about half as great as the 10 percent year-to-year rise expected earlier.

Demand for labor continued to rise throughout the district, and labor shortages are reported almost everywhere—even in Detroit. Some firms have reopened training centers shut down in 1969 or 1970. In many factories, average weekly hours are about as long as can be scheduled effectively. Absenteeism and turnover have increased. Hiring standards have been lowered. New hires of many large firms include a large proportion of veterans, minority types, and women in an attempt to fill prescribed quotas ("quantified objectives").

Union demands are expected to go far beyond the guidelines in most negotiations. Six months ago, union leaders were telling truck drivers that little, if any, basic wage boost would be sought. Current demands are for an 8 percent rise in wages and a variety of other items that are said to add up to a 20 percent first-year boost. Steel industry executives appear to believe that the arbitration agreement will permit a settlement in 1974 without a strike or an inventory buildup, but this may simply mean that steel will follow the pattern set in the auto industry without a fight.

Responding to a special question, 40 percent of Milwaukee purchasing managers said recently that material shortages will severely reduce ability to produce by midsummer. The most serious problems involve fuel, electricity, steel, castings, fasteners, and wood. In all areas, buyers continue to report lengthening lead times, and in recent months they have noted a sharp deterioration in overall vendor reliability and in quality of items received. Almost all are paying higher prices each month for some major items.

The gasoline and fuel oil supply problem has worsened with supplies curtailed or shut off to independent dealers and distributors. State governors are calling for emergency measures to meet farm needs.

Lead times on all types of steel have lengthened further, and new orders for hot and cold rolled sheet are now scheduled for delivery in August and September. A Chicago-area mill that expects to operate at capacity through the year is attempting to arrange vacations to reduce the summer decline in output. There is no way to increase steel output in the near future because of limitations of basic facilities, especially slabbing mills. Steel users appear to be building inventories, while mills have reduced their holdings of finished and intermediate products.

Orders for most types of capital equipment are running 25-50 percent above last year's improved level. Orders would be even higher if all orders were accepted. Freight car shortages are widespread, and orders for new cars at last are rising significantly. Sales of all types of farm equipment are excellent and some types, especially large tractors, are in short supply. The motor vehicle industry, both autos and trucks, is operating at capacity. Expansion plans are being pushed, but availability of various components will limit output for some time to come. All major foreign markets for capital equipment are now vigorous again.

A recent survey by this bank shows that district farmland values rose nearly 6 percent during the first quarter and are up 11 percent from a year ago—the largest gains registered since this survey started in 1958. Farm mortgage loans are readily available. District rural banks are meeting strong loan demand from farm borrowers, especially for capital investments.

As of late April, only 35 percent of the corn and soybean acreage in Illinois had been plowed, as opposed to 78 percent a year ago and 95 percent in 1971. While these conditions could improve rapidly with drier weather, delayed plantings typically result in lower yields. Fuel, seed, and fertilizer continue in short supply. With more acreage to be planted, needs will be especially large. Many Midwest observers anticipate little further decline in livestock prices this year. Bad weather has boosted feed prices, and losses of calves, poor weight gains, and the banning of DES will hold down meat supplies.