About two-thirds of this District's respondents expect the inflation rate to continue at 10 to 11 percent for the remainder of 1974; three anticipate a decline to 7 to 8 percent by year-end and three look for the rate to go higher. Although materials shortages are cited in some instances, the main concern is with cost-push inflation. Labor-management disputes are increasing and recent settlements in many cases have exceeded the present inflation rate.

In evaluating the probable course of the economy over the next six months the respondents put new emphasis on the role of the consumer and their analyses place them in one of two camps. The first sees signs of growing consumer resistance to high prices, postponement of large-ticket purchases and growing difficulty in carrying present debt burdens (there has been a three-percent decline in California's per capita fluid milk consumption and a decline in gasoline consumption per car in Idaho). The second considers that consumers are accommodating to inflation as a way of life, maintaining current consumption levels and purchasing homes as an inflation hedge in spite of high mortgage rates.

Agricultural output continues to be a positive factor in the Twelfth District's economy. The crop outlook is good and prices remain strong because of the worldwide shortage of sugar, flooding in the Midwest and drought in the south. Growers in Idaho, however, curtailed sugar beet acreage by 25 percent and planted grain; sugar beets are currently selling at $50 a ton compared with $36 a ton a year ago whereas the contract price on grain is now $6 per cwt. compared with $7 per cwt. last year. Cattle feeders are sustaining heavy losses as large supplies have driven beef prices down 15 percent since January. In spite of this, agricultural income is expected to show a sizable gain in 1974.

Lumber prices, plywood especially, have softened and some small plants have shut down or limited output in other ways. The industry continues to mark time awaiting a pick-up in housing construction. Pulp and paper manufacturers, on the other hand, are experiencing vigorous demand and prices are climbing rapidly. One manufacturer in the food industry stated that the price of milk cartons is now 30 percent higher than a year ago and it is expected to increase another 10 to 15 percent in the third quarter of this year.

The Branch banks report increased activity at the credit window, but less than would be accommodated. They reason that the commercial banks are being selective about loans, especially new accounts. Some nonbank respondents, however, believe that the commercial banks, especially the larger ones, are dangerously illiquid and yet continuously strive to extend new loans in order to maintain profit margins over CD rates. One bank has lowered its earnings forecast to 5 to 8 percent over 1973. The Salt Lake City Branch reports record Treasury bill purchases by individuals and a bank in southern California, on the hearsay level, quotes customers as saying that they "intend to put their money into governments or quasi-governments until this era of insecurity passes."

An independent oil producer claims that there is currently an oversupply of petroleum products in the United States. He avers that most major oil companies are using devious methods to hide their true net income figures.

Overall, there appears to be a feeling of dismay and helplessness over the direction the economy is to take. One banker states, "there are growing fears that very high financial costs, pervasive loss of liquidity, slow economic growth world-wide, and much deep negative psychology will cause a new economic downturn soon unless policy changes are made to improve confidence."