According to bank directors' responses, the energy crisis has not yet significantly slowed District economic activity. Many District businessmen, aware of the favorable agricultural outlook, are actually optimistic about their prospects in 1974, Nevertheless, directors expressed concern over rising fuel costs, materials shortages and the outlook for the District tourist industry. Also, recent economic developments have caused some District businessmen to alter their plant and equipment spending plans. In general, anticipated high farm incomes this year may well cushion the District from the expected slowdown in national consumer spending, District agricultural banks report softening in the demand for short-term farm credit, while the demand for farm real estate credit remains fairly strong.

Although fuel supplies have been adequate, the energy crisis has begun to influence the District's economy. In the Minneapolis/St. Paul metropolitan area, airlines have laid off workers, some small manufacturers have had difficulties obtaining petrochemicals, and the District's major auto assembly plant has reduced operations. One director, who is a college president, indicates that although fuel has been available, higher fuel prices are straining his school's budget. Another director faces a similar dilemma; his firm's hauling and delivery costs are up 50 percent from a year ago. A western South Dakota director says that his area's motel operators are seriously concerned about their summer business. According to a Montana director, a national campground franchiser in his area reports franchise revenues so far this year are unchanged from a year ago, compared to gains of around 30 percent in previous years. This firm has reduced its payroll 30 percent. Other businessmen in his area, however, are generally quite optimistic about business in 1974. Another Montana director reports adequate gasoline supplies in his area; several dealers have actually reduced prices to attract business. The trucking strike has disrupted District livestock marketing and food processing operations, but this is expected to be only temporary.

Directors also voiced their views on materials shortages. One director believes his firm will be able to obtain necessary supplies but thinks that marginal businesses who have been delinquent in paying bills may be in for trouble. He figures many firms have built up larger then normal inventories of materials to avoid shortages. A Twin Cities area banker agrees; he adds that by stockpiling raw materials, manufacturers have added to inflationary pressures. Another director reports no recent improvement in efforts to obtain steel and plastic resins.

A Montana director indicates that farm machinery continues to be almost impossible to obtain. Part of the problem stems from a lack of foundry capacity and reduced foundry operations. Adequate fertilizer supplies remain a concern of District farmers. Southern Minnesota farmers are purchasing fertilizer now to ensure sufficient supplies this spring. A Montana director reports that recent fertilizer price increases have raised current fertilizer prices above prices contracted earlier, and many companies are not honoring these contracts.

Reports are mixed about the impact of recent economic developments on plant and equipment spending. A southern Minnesota director says that the recent oscillation in prices has made some of his area's agricultural producers cautious about their capital spending plans. Although the construction outlook in general is quite favorable, the anticipated slowdown in tourist business has caused motel operators in western South Dakota to forego expansion plans. A director who heads a large food processing firm reports no change in his firm's capital spending plans. A Twin Cities area banker states that although major firms have not reduced their capital spending, two Twin Cities firms using petrochemicals have cut back. A Montana director indicates that uncertainties over government policies have caused one of his area's firms to reduce its capital spending.

Anticipated high farm incomes are expected to cushion the District's retailers from the expected slowdown in consumer spending this year. A Montana director, for example, finds his area's retailers very optimistic about this year's business, and a southern Minnesota director reports no drop-off in automobile sales in his area. Nevertheless, several reports indicate that District consumers are becoming cautious. A western South Dakota director reports that his bank's consumer installment loan business has recently been off. An Upper Peninsula of Michigan director has noticed that the energy crisis has made his area's businessmen and consumers hesitant to spend.

According to our latest agricultural credit conditions survey, Ninth District farmers are enjoying a record level of prosperity, which is expected to lessen their first quarter demand for short-term loans. More banks report that they are actively seeking new farm loan accounts now than at any time in the survey's recent history. The demand for farm real estate, on the other hand, remains fairly strong.