Tenth District bankers and department store executives worry about the trend of business. Although loan demand remains strong, slow deposit inflows are tightening credit, and bankers are becoming more cautious in their lending policies. Retail sales softened in recent weeks at major department stores, where managers now consider inventories to be more than adequate. On the brighter side, the tourist season is finishing strong, recent rains have improved the agricultural outlook, and automobiles are selling fast. The increase in demand for new and used cars, dealers concede, probably will mean a slow starting 1975 model year.

Chamber of Commerce and travel officials in the Tenth District Western states report a rebound in July-August tourist flows following a slow start at the beginning of the season. While through June, tourism in Colorado, Wyoming, and New Mexico was 8-l0 percent below that of last year, there was considerable improvement in July and August. Colorado, in particular, expects the late season increases to fully compensate for the slower June. Fear of gas shortages and the lower speed limit have seemingly shifted or possibly compressed the season. The most serious "energy crisis" casualties appear to be the secondary attractions which are being bypassed this season as tourists travel directly to major destinations. Automobile sales have shifted into high gear throughout the District in recent weeks. Most dealers in domestic cars report that their August business was as good or better than last year, and the best month of the model year. Heavy buying continues in the small and intermediate categories, but big cars are selling better, too. "I could have sold another 8 to 10 Thunderbirds this month," said a Ford dealer. The demand for used cars also has jumped, pushing up prices. New car dealers agree that the announcements of higher prices and new devices on 75's have stimulated the surge of interest in 74's. Consequently, they expect a slow start on sales of 75's, although about half of those contacted were optimistic about prospects for the model year as a whole.

A recent softening of retail sales at District department stores contrasts sharply with the current clamor for new cars. The demand for home furnishings and appliances has dropped considerably. "A year ago, you couldn't get enough home freezers. Now everyone is overstocked." Several controllers of major department store chains worry that sales may continue to sour. All noted that the supply situation was much improved—"the best it's been in a year," said one. Inventories are reported as adequate or excessive.

August rains came too late to be of much help to the parched District corn, but in time to revive pastures and to improve prospects for grain sorghum and soybeans. With feed grain production now estimated to be 15 percent below last year, prices likely will stay strong, further compounding the problems of the cattle feeding industry. Additional moisture is needed in Nebraska, Colorado, and Western Kansas to prepare seedbeds for the winter wheat crop.

Deposit inflows at large Tenth District banks remained sluggish in August. Business loan demand continued strong at these banks, although total loans declined somewhat due to a drop in loans to farmers and to financial institutions.

Many of the bankers contacted expressed concern over what they appraised as worsening economic conditions. Reflecting this concern, their overall mood was one of caution with respect to new loan demand. Some of the bankers contacted indicated they have recently changed their policies with respect to new borrowers. Loans to new customers will be sharply curtailed or discontinued, although an effort will be made to accommodate older customers even if they are experiencing temporary difficulties.

Exceptions to this policy were noted for new borrowers in energy related fields. Some bankers contacted specifically noted that loans were growing for extracting oil, shale, gas, and coal and for the manufacture of equipment in these industries. Also, a few bankers indicated that new loans were being made to small independent oil well operators who were reported to be doing well due to the current higher price of crude. Some concern was shown for loans collateralized by securities, which were currently falling in price. Continued falling security prices could lead to a call for additional collateral in a significant portion of these loans.

Bankers reported that real estate and heavy construction loans were experiencing the most delinquencies. On the other hand, loans to cattlemen were reported to be collateralized at a higher level due to an increase in the price of cattle.