Most bank directors believe that the Administration's efforts to control wages and prices directly should be terminated on April 30, and that the Congress should not extend the Economic Stabilization Act. Concern about job security is not expected to temper union demands for wage increases this year. District fertilizer supplies will be very tight this spring, which could reduce District crop yields. District manufacturers look for continued sales gains during the first nine months of 1974.

The general opinion expressed by bank directors was that the Economic Stabilization Act should be allowed to expire completely on April 30 instead of being extended along the lines recommended by the Administration. One set of views was that wage-price controls are not workable in a market-oriented economy and have resulted in distortions and shortages. A Montana director indicated, for example, that the cattle market has not yet recovered from last year's freeze on beef prices and, in the view of a Twin Cities-area banker, efforts to control interest rates have been disruptive to capital markets and have contributed to higher interest rates. These directors believe that a complete lifting of wage-price controls would alleviate shortage problems. Another view was that the uncertainties surrounding the Administration's current efforts to decontrol the economy have made it very difficult for businessmen to determine costs and prices; this director believed that completely decontrolling the economy would allow costs to stabilize. Furthermore, two directors indicated that further efforts to control health care costs could result in distortions and shortages in that industry. Given the current easing in demand pressures and rising unemployment, one director thinks the timing is as nearly perfect as could be desired for an immediate and complete end of controls.

In contrast to these views, two directors indicated that the Government should continue to have some direct influence on wage and price decisions and believed the Administration's proposals should be implemented. However, one of these directors favored eventually dropping the control program. Another opinion was that the Federal Government should do something to control wages and prices, but this director thought the Administration's recommendations are unworkable.

The directors believe rising unemployment and concerns over job security are not likely to lessen wage demands this year. At one director's firm, collective bargaining agreements so far this year have led to minimum wage increases of 10 percent; the unions still negotiating are demanding substantially more. Several directors indicated that their area's teachers are going to be asking for very large wage increases this spring. Besides the recent increases in the cost of living, shorter working hours this year and higher social security taxes are going to make workers more adamant in demanding wage increases. In the upper peninsula of Michigan, steelworkers are expected to demand a full cost-of-living increase as well as job security provisions. In certain industries where business is softening, workers may lessen their wage demands in return for job security provisions.

Directors expect fertilizer supplies to be very tight this spring. Several directors cited shortages of nitrogen and phosphate fertilizers in their areas, ranging from 10 to 30 percent of anticipated demand. Not only are fertilizer shortages foreseen, but the price of fertilizer has risen tremendously. However, several factors were cited that could minimize the impact of prospective fertilizer shortages on agricultural production. First, the stockpiling of fertilizer may have occurred, so that shortages may not be as great as currently expected. Second, many farmers have tended to over-fertilize, so that, if available fertilizer is used more efficiently, crop yields may not be affected. Third, nitrogen shortages can be offset or minimized if the weather is favorable—if the District receives adequate rainfall.

Respondents to our first-quarter industrial expectations survey look for continued sales growth during the first nine months of 1974. First-quarter District manufacturing sales are anticipated to be up 12.7 percent from a year ago and then advance 9.5 percent during the next six months. Durable goods sales gains during this period are expected to surpass advances in nondurable goods sales. As these sales expectations are quite close to those made last November, concern over materials shortages and the impending slowdown in economic activity have not caused respondents to alter their sales outlook.