Judging from responses of buyers of materials for major manufacturers in the Tenth District, no recession in this region is likely in 1974. Although many raw materials, such as petrochemicals, and many advanced-product inputs, such as electric motors, are in extremely short supply, most manufacturers are cautiously optimistic that sales this year will surpass those in 1973. Bank deposits remain at high levels, and the energy crisis appears to have stimulated business loan demand. Consumer installment lending continues strong, and feedlot operations are boosting agricultural loans. In fact, bankers report no recent developments suggestive of a slowing economy, save weaknesses in construction loans and auto loans. All bankers contacted are keeping their CD maturities short, anticipating a decline in interest rates. In the agricultural sector, farmers have planted more wheat again, and an insulating snow cover is improving crop prospects.

The materials supply situation continues to deteriorate. Purchasing agents for major manufacturers in the Tenth District say that most items are harder to get now than they were a few months ago, when they reported extremely short supplies. Prices and lead times have doubled or tripled on certain items, such as zinc; some materials are not available at all, even on an allocation basis. In many instances, the energy crisis is blamed for making matters worse.

Despite the severe difficulties in obtaining supplies, almost all the manufacturers expect to produce and sell at last year's level or higher. True, some have revised downward their earlier, more optimistic sales forecasts for 1974. For example, because of the energy crisis, one major manufacturer of private aircraft now expects to sell 5 percent fewer airplanes, instead of 35 percent more, in 1974 over 1973. Another company, tied to the auto industry, expects a "down" year. All of the others, however, say that 1974 will be better than 1973, although several hedged their forecasts with phrases like "if we don't panic", "if raw materials are available", and "if we don't have to shut down because of fuel cutoffs Consistent with their ordering plans and their firms' sales expectations, most purchasing agents expect employment to hold up well at their factories during 1974.

Seeding of winter wheat last fall totaled 51 million acres, up 18 percent from the previous year and the largest since the 1967 crop. Currently, United States production is projected at 1.51 billion bushels which would be 19 percent above the record crop in 1973. In the District, where roughly one half of the nation's winter wheat is produced, fall seedings of wheat were 10 percent larger than a year earlier. However, current projections point to a slightly smaller crop than in 1973-715 million bushels versus 734 million-due to much late seeding which increases the likelihood of winter kill from cold winds. Fortunately, a heavy blanket of snow now covers a large portion of the wheat in the District, reducing the threat of this hazard.

Interviews with larger Tenth District banks revealed deposit and loan activity over the last few weeks to be at or above seasonal norms. Business demand deposits increased about as expected in the latter part of December, but some bankers are pleasantly surprised at the continuation of high levels of deposits through the first week in January. Large CD positions have not changed appreciably. Of those interviewed, only one banker feels that the lower reserve requirements have encouraged them to be more aggressive in selling large CDs. All banks anticipate a decline in interest rates and are setting their offering rates to keep their CD maturities very short. Loan demand at District banks shows no sign of slackening. To date, the petroleum shortage seems to have added to business loan demand. Some firms need to finance larger stockpiles of petroleum products they feel may become in short supply. This was especially evident to Kansas City banks serving customers in the plastics industry. Banks in Tulsa and Denver were feeling the effects of increased oil and coal production, respectively. Consumer installment loan volume is also holding up as reductions in auto loans were being compensated for by increases in other areas, including home-improvement and credit-card loans. Agricultural loans are sharply higher in some parts of the District because larger numbers of cattle are moving onto feedlots. The only loan category demonstrating consistent weakness throughout the District is construction loans.