Though some areas remain strong, economic weakness appeared to be spreading, even before the coal strike began. The consensus is a deterioration in economic conditions since last month's reports, with the earliest chances for a recovery in mid-1975 and then only a mild upturn. The drop in residential construction has spread to many other industries, such as timber and lumber, furniture, and textiles. Auto and auto-related manufacturing industries are also depressed because of the resistance to buying the new model cars. Plant closings, job layoffs, and, in some cases, bankruptcies have resulted. The regions hardest hit are those where these industries predominate: the East, Midwest, and Southeast. Other manufacturing industries, particularly capital goods, report continued strong demand. However, some softening may be starting in these industries, with an easing of new machine tool orders and cutbacks or postponements of capital-spending plans reported from some Districts.

Consumer spending, particularly for big-ticket items, is off. Reports indicate that consumers are increasingly becoming more price-conscious and purchasing more heavily sale merchandise. Production and general sales declines have resulted in easier availability of many materials in short supply only a few months ago and, in some cases, lower materials prices. Only a few items are still in short supply. There was near-universal accord that because of sales declines and the greater availability of basic materials, manufacturing and wholesale and retail trade inventories are now too high. Realignment of these inventories will slow economic activity through the early part of next year. Bank lending has leveled off in most Districts because of a decline in loan demand and more restrictive loan requirements. Savings and loans inflows were reported in several Districts but are not expected to give any immediate relief to housing. A number of favorable crop reports were received, but livestock producers are still caught in a cost-price squeeze.

Plant closings and layoffs are now appearing more frequently in District reports. Richmond, Atlanta, Chicago, and St. Louis all report production cutbacks, plant closings, and layoffs by a wide range of manufacturers-such as autos, mobile homes, appliances, televisions, furniture, textiles, bicycles, and electrical components. Many of these cutbacks are related to the decline in housing, although a general fall-off in demand is also responsible. Lumber producers in the Atlanta and San Francisco Districts have been severely hit by the decline in residential construction. Lumber demand is practically nonexistent. Some areas have escaped substantial layoffs, however. Both Minneapolis and Kansas City Districts report only a slight rise in unemployment. They do not expect the situation to worsen significantly in the near future.

Capital goods industries remain the most buoyant. But even here more signs of cutbacks and postponements were reported. Cleveland reports machine tool orders still are strong, but a number of spending programs for 1975 have been cut back. Atlanta, Chicago, and Kansas City report similar cut backs. Capital equipment orders in the Chicago District have fallen off recently, and stretch-outs of orders have also become more common. A Richmond survey shows that one-third of its respondents now consider capital-spending plans excessive. Orders remain strong for steel and other types of capital goods, however.

There is growing evidence of a general weakening in demand for most consumer items. Auto sales are uniformly poor in all Districts. Most big-ticket items are not selling well. Only Minneapolis reports any strength in higher-priced consumer goods. Reports from San Francisco, Dallas, Boston, New York, Atlanta, and Philadelphia suggest that price cutting and sales campaigns by retailers and discount shopping by consumers are now more commonly practiced. Expectations about Christmas sales range from optimistic in Minneapolis and Dallas to Boston's report of no expected change in sales from last Christmas.

Shortages have apparently eased considerably according to reports. Boston, Cleveland, Atlanta, Chicago, and San Francisco all indicate that many shortages are abating. Cleveland notes that the greater supply availability has led to a moderation of materials prices. Several Districts report continued shortages of steel and petroleum-base products; but in the Chicago and San Francisco Districts, even these shortages have moderated. The coal strike will create new shortages, but it is too early to tell how severe these will be.

Excessive inventories and the need for inventory realignment appear to be on many businessmen's minds. Excessive inventories are the result of both declining sales and the easing of shortages. Dallas reports higher-than-desired retail store inventories are attributed in part to declining sales but also to overshipments by suppliers who are themselves trying to reduce inventories. Concern over shortages has dramatically given way to attempts to reduce inventories, according to Chicago's report. In the Kansas City District, the attempt to reduce inventories was one reason cited for the flatness in bank loan demand.

Most Districts report that loan demand has begun to ease. Philadelphia notes that loan commitments have fallen both because of a decline in demand as well as more restrictive lending policies by many banks. Business loan demand appears to be off the most. San Francisco indicates that many large borrowers are returning to the capital markets. Minneapolis is the only District reporting continued strong loan demand because of agricultural borrowing. Inflows to time and savings accounts at commercial banks are beginning in many Districts. Funds are also beginning to flow back into savings and loan institutions. The Kansas City report indicates that savings and loan associations are beginning to see a return to "black ink." New York also notes an inflow but doesn't believe it will significantly improve the housing situation in the near future.