The region of the Seventh District has not yet witnessed any letup in the extremely vigorous demand for metals, chemicals, fuel, consumer goods, business equipment, and building materials. Very hot weather in the second half of August cut production of steel, motor vehicles, and other products, but these developments are presumably associated with extending the period of shortages. Foreign demand for many U.S. materials and products at "bargain prices" is intense and would take up any domestic slack in the near future. Orders for capital goods continue in heavy volume. Manufacturers are concerned with shortages, delayed deliveries, and quality problems. Declines in farm prices in recent weeks have about wiped out the surge recorded in the August indexes. Labor markets remain very tight. New commitments for mortgages on single-family homes are very difficult to obtain, but the volume of total construction activity remains very high.

Large firms generally appear to be following the price guidelines, and in many cases prices have not been raised as much as would be allowed by the Cost-of-Living Council. Most smaller firms are raising prices freely. Price controls have restricted availability of some goods, including petroleum products and certain grades of paper. Charges for services—utilities, maintenance work, and medical care—have increased sharply in the past month or so. For example, some home furnace maintenance fees in the Chicago area jumped 55 percent in the summer, and the city of Chicago intends to raise water prices to city customers and 67 suburbs by 34 percent. (All this suggests that John Galbraith's theory that the general price level can be controlled merely by controlling prices charged by giant firms is not valid.)

Availability of labor, skilled and unskilled, poses a problem for many employers in the District. The job situation was aggravated in the last two weeks of August as students left summer jobs in manufacturing, trade, and recreational activities to return to schools that opened before Labor Day this year. Help-wanted advertising has increased sharply, and help-wanted signs, full or part time ("hours arranged"), are a very common sign at manufacturing, trade, and service establishments.

The order surge continues in the capital goods industries (apparently across-the-board), and the volume of new construction contracts for manufacturing buildings is very large. Design firms are swamped with new work. Various hard and soft goods industries see a need to push capacity expansion programs for the next two to five years—with short supplies predicted for the intervening period. Expansion programs for small cars and trucks are in full swing. The chemical, petroleum, public utility, and paper industries are all pushing expansion plans more-or-less vigorously. The blowup of order backlogs in machine tools, freight cars, construction and farm equipment relates to lags in increasing output caused by limited availability of materials, parts, components, and skilled labor. A very large construction equipment producer has announced a five-year program with capital expenditures far above the level of recent years.

Steel output was restrained in the summer by hot weather, labor shortages, equipment failures, and electricity cutbacks. Smaller firms which used to buy steel from warehouses on a month-to-month basis have been forced to negotiate nine months or more in advance of needs. Shortages of steel and various other materials are increased by the fact that some users have increased inventories beyond normal levels to insure supplies (although inventories overall are relatively low). U.S. steel firms are sorely tempted to sell steel abroad in volume at premium prices, but, thus far, have not done so.

Gasoline supplies are reasonably adequate in most areas, but scattered shortages remain. We are told most oil firms are not following the government guidelines for allocating supplies to favored users. Rigid price controls on gasoline, diesel fuel, and home heating oils may reduce availability. For example, prices for industrial fuels are above prices of the higher grades, thereby encouraging diversions. A cold winter may bring critical heating oil shortages, especially for the Midwest and the plains, which are not allowed to bid supplies away from other areas. Moreover, present rules provide no incentive to import oil products from abroad.

Net outflows of funds from the S&Ls remained large in August, at least in downtown Chicago. The volume of existing mortgage commitments remains very large, but new commitments on home mortgages in the Chicago area are being made on 30-40 percent down payments (at the 8 percent usury ceiling), and are commonly restricted to established customers. The home-building picture for next year is growing darker.

Power shortages in this area partly have reflected restrictions on nuclear power plant operations. The August heat wave caused interruptions for industrial users and some voltage reductions.

The prospect is for record crops of corn and soybeans. Beef supplies appear adequate to prevent a sharp rise in prices. Closed slaughterhouses have been reopened. Elevators have paid premiums to obtain covered hopper cars, still in short supply, to move grain.