Business activity continued to expand vigorously in April according to a group of businessmen in the Eighth District. The sharp uptrend in retail sales established in the first quarter of the year continued. Manufacturing activity maintained a high rate of expansion, and manufacturing inventories at current prices are declining as a result of strong demand. Construction activity on a seasonally adjusted basis was generally unchanged at the relatively high level of recent months. Employment continued to inch up. Farming operations are lagging behind their normal seasonal pattern because of excessive rainfall and flooding, but income prospects for farmers remain good except for the relatively small number who may not be able to plant crops because of flood water. Inflation remains a major worry among businessmen.

Retail sales at major department stores in the Eighth District rose sharply from March to April on a seasonally adjusted basis. Some of the inner-city stores in St. Louis had month-to-month sales gains in April for the first time in several years.

Most lines of manufacturing activity have continued to gain momentum in recent weeks. Among those manufacturers in the Eighth District reporting gains in output and orders were producers of steel, aluminum, paint and coatings, clothing, machine tools, and synthetic fibers. Some firms reported that the pace of shipping cannot be maintained at current levels as inventories are being pulled down to meet orders. A representative of the synthetic fiber business reported that fiber demand is "unrealistically" high. Lack of capacity is a common complaint, and, in response, a strong upward movement in capital spending is apparently under way.

Those firms interviewed reported further moderate increases in employment and "tighter" labor markets than earlier in the year. Most representatives reported that both skilled and unskilled workers were in very short supply and that those workers who can be hired at current wage rates are less efficient than their current employees.

Extremely wet weather and floods have retarded farming operations over most of the central Mississippi Valley. The situation is not yet serious except for those individual farms that are under water and are likely to remain flooded for several more weeks. If the rains continue for another week, it could become critical for the 1973 corn and cotton crops, as further delays in land preparation and planting could lead to a reduction in output. Significant freezing damage has occurred in a number of apple and peach orchards in the district, but the impact on national output is difficult to assess at the moment. Farmers, however, remain optimistic about their 1973 income prospects. Livestock and livestock products are being sold at profitable prices, and the outlook is for relatively high prices for the current year's crop.

Inflation remains one of the major concerns of businessmen in the district. They invariably reported "excessive" demand at current prices for both final product and productive resources. Typical comments were "inflation is getting worse," "the price increases are alarming," "the FPC is causing or contributing to the 'energy crises' because they suppress incentive to explore for gas and the prices of alternative sources will be higher," and "buildings are being revalued for insurance purposes by 20 percent due to rising costs."

The quantity of credit demanded continued to expand faster than the supply of loan funds at current interest rates. Banks, savings and loan associations, and insurance companies all reported a strong loan demand. Consequently, interest rates on all types of credit instruments and with all maturities are apparently rising.