The general economic picture in the Seventh District has continued to deteriorate in the past month, and at an accelerating pace. General forecasts publicized in this region commonly see no revival before next spring, even after midyear in some cases, and then only of a moderate degree. The capital goods boom continues, but it now includes a narrowing group of sectors. Employment is declining and unemployment is rising in virtually all industrial centers in the District-although to varying degrees, depending on specialization. Retailers are pushing contra-seasonal special promotions very hard, but they complain of a "deep recession psychology." More business and financial executives have become disturbed over the capacity of their creditors. There are no bright spots.

Procurement problems on purchased materials have now been reduced to a few items, such as heavy forgings and heavy castings needed for capital goods, and certain chemicals. Some shortages disappeared "overnight," e. g., bearings, fasteners, and brass mill products-all very tight a few months ago. Almost half of the purchasing managers in Milwaukee (the preeminent capital goods center) reported shorter lead times in November, compared to 85 per cent reporting longer lead times a year earlier. In addition, deliveries are more dependable, more prices have declined, and there are fewer complaints about poor quality. Remaining tightness in lighter steel items doubtless reflects "precautionary" buying. Finally, imported items, such as steel and bearings, are more available.

New orders for most capital goods have leveled off or declined. Apparently firm backlogs indicate capacity operations well into 1975 for equipment for railroads, water transport, mining, chemical processing, oil-well drillings, steel mills, foundries, environmental control, and certain types of agriculture and construction. Specific categories include heavy farm tractors, large bulldozers, overhead cranes, mobile cranes, large mining shovels, and "cutting type," numerically-controlled machine tools. In general, the weaker capital goods sectors are the "lighter" types of equipment, along with machinery used in producing finished goods, as opposed to basic industries. Order cancellations have been significant in equipment for residential construction, equipment to produce consumer goods (not just autos), and for trucks of all types. Perhaps the most abrupt downturn has occurred in heavy trucks where net new orders have been about zero for three months. Heavy truck shipments are still at high levels, but melting backlogs suggest, to one expert, a drop of at least 27 per cent in physical units next year.

Layoffs have occurred, and are continuing, in a wide variety of industries, but the largest cutbacks have been in autos, auto parts, appliances, television sets, furniture, and most recreational equipment. In the case of recreational vehicles, one observer expects a 25 per cent decline in 1975, following a 50 per cent decline in 1974, and he believes that few producers will survive.

Many executive and professional types are in the job market, often willing to take positions for which they are "overqualified." State and local governments also are reducing staff, partly to meet higher salary requirements.

In the auto industry, concern exists over the adequacy of supplementary unemployment compensation funds, which were never intended to handle layoffs of the present magnitude and duration.

Retail sales were significantly below expectations in November in virtually all lines. A surprising exception is luxury autos, with some models in short supply. Retailers have been advertising special promotions extensively. In some cases sales of clothing and household goods started before Thanksgiving, rather than after Christmas. Retailers complain that "price sensitive" consumers respond to bargains, but do not do the normal amount of "impulse buying."

More and more companies are engaged in strenuous efforts to cut costs and reduce borrowings. Many firms have placed restrictions on travel and other marginal expense. Commonly, new hiring has been stopped, or closely restricted, and attempts are underway to cut inventories and receivables, and to slow capital spending programs. Bankers and businesses, increasingly, are concerned about the ability of established customers to meet scheduled payments, and there are suggestions of impeding insolvencies far beyond the scale of anything experienced in recent years.

S&Ls in Illinois and Wisconsin continued to show a net outflow of savings in October. The November figures may be positive, but no significant revival in residential construction is expected before later spring. S&Ls will want to rebuild liquidity and repay debt. Even then, they are expected to remain very cautious. Some builders with "money available" complain that customers are very reluctant to make decisions, fearing the economic climate. Many builders have abandoned projects, and widespread bankruptcies are feared. New Federal programs are not expected to do much good. The mobile home industry is as bad off as "on-site" housing. Nevertheless, vacancies of rental units are low and rents are rising. In the Chicago area, rents are expected to rise 15 to 20 per cent per year for at least two years.