Directors of the Federal Reserve Bank of Kansas City and its Branches report that economic activity remains generally strong in their areas, with the exception of residential construction. Concern was expressed about the energy supply situation, and most respondents called for an end to wage-price controls. Farm prospects continue strong, except among some cattle feeders. Total loan demand at District banks was weak in October, with business loans the weakest component.

General economic activity remains strong in most parts of the Tenth District, although some slowing in the rate of increase has occurred. Retail sales as a whole continue to be fairly strong, but automobile sales seem to be weaker than anticipated earlier. Residential construction is reported to be generally slower across the District. Home-building is off in Omaha and Oklahoma City as well as in out-state Nebraska and Oklahoma. Earlier overbuilding of apartments in Oklahoma City has led to extremely high vacancy rates as well as to a halt in new construction. Only Denver reports continued strength in home-building, with construction labor in tight supply. Commercial construction activity is holding up better than home-building in most areas.

Two matters of concern were mentioned specifically by several Directors: the energy situation, and wage-price controls. Reactions to the energy situation were mixed. (These reports preceded the President's speech on the subject.) Several Directors blamed the situation on "going overboard on ecology." "Much concern over the energy crisis" is reported from Albuquerque, while little concern was reported from smaller cities and agricultural areas of Colorado and Oklahoma. While one respondent felt that the situation was not as critical in Denver as elsewhere, another reported that "people here in Denver are scared...of what the energy crisis will bring." One Director believes that current economic forecasts are giving too little weight to the energy supply situation.

Only one Director spoke in favor of keeping wage-price controls in place. All others commenting on them believed that controls should be abandoned soon, as being "ineffective" and "an unnecessary nuisance." A Director in the steel business remarked that controls have really "goofed up" that industry, specifically by keeping prices of some items so low that they become unprofitable to produce and hence difficult to get.

Generally, farm prospects continue strong in most areas, although the downturn in cattle prices has put several producers in serious trouble. This stems from their buying feeder animals at unrealistically high levels and then holding them too long, thinking that prices were bound to go up shortly after the freeze was lifted. However, it was the Directors' view that, while a few smaller operators would suffer big losses, most producers are in good enough financial shape to weather the storm, assuming that cattle prices strengthen in the not too distant future. Most of the other sectors seem to be in excellent shape. The harvest is progressing rapidly, the crops are good, and prices are such that crop income will show a sharp jump over last year. Furthermore, producers of feeder and stocker cattle are still making good profits, although not as good as was experienced earlier in the year.

Locally severe flooding occurred this fall in parts of Kansas, Nebraska, and Oklahoma. The effects in Nebraska have not been as harmful as first expected, and high prices and good crops there are contributing to a healthy economic situation for the state as a whole. In Oklahoma, the floods affected some of the best wheat land in the state. The major impact there is likely to be the lessened availability of winter pasture on much of that land.

Tenth District bankers indicate that total loan demand was weak in October, although this was not uniformly true for all banks contacted. In general, the component of loan demand reported weakest was business loans, while agricultural and real estate loans were generally steady. On the other hand, consumer installment loan demand was reported as being strong. Most respondents reporting weak loan demand also reported that the interest rates they were charging were declining or would decline in the near future. The decline in interest rates was attributed to the need to keep rates in line with money market conditions in New York. One respondent reported that it lowered its rates to compete on a national level with large money center banks as its national business was off somewhat. No respondent reported any effects on rates charged from the newly imposed ceiling on wild-card CDs.

Total deposits at weekly reporting banks continued to increase in October. In conformity with the trend for this year, but in contrast to September, most of the increase in deposits was in time and savings deposits rather than in demand deposits. Large CDs at weekly reporting banks also increased substantially in October. Several of the banks surveyed, however, especially those reporting weak loan demand, reported a runoff in CDs and a reduction in their CD rates. This gives rise to the possibility that the runoff may have been intentional on their part.