The view of about 30 economists (primarily from major industrial firms and commercial banks in the District) who attended the Fourth District Economists Roundtable meeting on February 8 shows the following projections for 1974: real GNP up 0.7 percent, the price deflator up 7 percent, and the unemployment rate averaging 5.7 percent. Economic activity in the District has been seriously affected by the truckers' strike in recent weeks. Total output may have declined during the past month or so, and layoffs due to the strike rose sharply early this month. The strike has caused severe dislocations among many manufacturers and wholesalers and has affected retail trade (resulting in some scare-buying and aggravating tight gasoline supplies in certain areas). Residential construction continues to decline; both auto producers and suppliers to the automotive industry have cut back operations sharply.

The business economists who attended the roundtable project a 1.5 percent decline in real GNP during the first quarter, a leveling in the second quarter, and resumption of growth at rates of 1.3 percent and 3.2 percent in the third and fourth quarters, respectively. There was general agreement that economic recovery would occur even if the oil embargo is not fully lifted, although many economists expect some softening in the embargo by spring or summer. Economic recovery in the second half largely reflects a projected pickup in' consumer spending and a moderate turnaround in residential construction.

The rate of increase in the GNP deflator is projected to slow to 5.5 percent by the fourth quarter, while the unemployment rate is expected to rise throughout the year—reaching 6.0 percent by yearend.

Business fixed investment and government spending, particularly transfer payments, are expected to be the major supports to the economy this year. Some economists, however, questioned whether the Federal government would be able to spend money fast enough to prevent a recession in the first half of 1974. Demand from the capital goods markets remains strong, according to economists from the steel and machinery industries. The backlog of a major machine tool producer in Cleveland has more than doubled in the past year, and the firm is quoting 80 weeks delivery on most types of equipment. Long lead times on many components have adversely affected the firm's ability to increase shipments. Thus far, there has been no letup in demand for machinery and equipment by the automakers or their suppliers.

An auto industry economist believes the worst of the decline in new car sales is over, and he expects the sales rate to improve during the remainder of the year (with a large makeup in the fall). The median forecast of nine economists whose firms depend heavily on the auto market shows total new car sales down 1.4 million units in 1974, with imports holding at or slightly below last year's level.

Steel industry economists report that the auto companies have been slow in adjusting their orders for lower steel requirements; reductions in steel purchases by auto firms are expected into the second quarter. The cutbacks by the auto firms are having little impact on the overall demand for steel—an unprecedented situation. Steel mills are operating at capacity and are having no trouble in reallocating steel to other users.

The truckers' strike, however, has caused serious disruption in shipments of finished steel products in many areas, particularly in Pittsburgh, Youngstown, and Cleveland. Many other firms, large and small, have been unable to receive materials or ship products. Layoffs and reduced hours have been widespread. During the first week of February, layoffs attributable to the truckers' strike amounted to an estimated 29,000 in Ohio alone.

At the roundtable meeting, there was much concern expressed over current and prospective distortions stemming from inflation. A representative from one of the major banks in the District reported an increasing tendency of corporations to seek the bank's advice in using escalator clauses in their contracts. Several economists mentioned the inability of government institutions (such as the ICC and state utility commissions) to cope fast enough with inflation by granting rate increases. Among other concerns noted were potential dislocations in savings outlets if inflation is unchecked, and the possibility of a sharp increase in the cost of labor settlements this year and next. (A steel industry economist said that the provisions of the recent aluminum agreement, if applied to the steel industry, would result in a 35 to 40 percent increase in labor cost over a three-year period.) There was also concern over the worldwide rise in petroleum prices, with the possibility of serious strains in international financial markets over the near term.

In discussing the energy situation, the business economists indicated that production in their firms was not being curtailed as a result of fuel shortages. (Shortages of other materials and supplies, however, continue to be a problem.) Several said their plants had been able to achieve huge savings (up to 25 percent) on electric power and distillate fuels without affecting output. An economist with a major electric utility in the District said his firm intends to proceed with its capital spending plans for the next five years, even with the possibility of continued energy conservation measures in the years ahead. Management believes the investment will be a good hedge against inflation if their demand projections for electric power usage are on the low side.

An economist with the Agricultural Department reported at the roundtable meeting that a tight supply situation in crops and livestock will persist through the first half of the year (followed by relief in the second half); farm prices are expected to average 10 percent above last year, and retail prices of food at home to average 12 to 14 percent over last year.