Current comment by businessmen and bankers, as reported by the twelve Reserve Banks, is decidedly more pessimistic than that of a month ago. The pervasive dampening effect of the General Motors strike is evident in most parts of the country. Employment continues to weaken, or at best, to show sluggish growth, in most Districts, while unemployment is reportedly rising further in several areas. On balance, reports emphasize continued weakness in consumer spending, and some further cutbacks or stretchouts of capital spending plans. Reports are mixed on the behavior of prices, but strong upward wage pressures continue to restrain any widespread belief that inflation will soon be under control. Residential construction activity is improving somewhat in parts of the country, but reports vary widely as to the degree of the recovery. Inflows of savings to financial institutions continue to grow, and somewhat easier mortgage terms seem to be available. Loan demand by consumers, potential home builders, and businesses is reported to be weak on balance, and is aggravated by problems in specific areas and industries.

In the past month, there has been some widening of the impact of the General Motors strike upon the economy. The two Districts in which the effect is most direct are Chicago and Cleveland, although the Chicago report indicates that after adjusting for the strike, economic activity in that District is level to slightly up. Seven out of the ten major metropolitan areas in the Cleveland District, however, are adversely affected, and other Districts—New York, Atlanta, St. Louis, and Dallas—trace either direct or indirect dampening effects to the strike. The Philadelphia report contains the suggestion that the underlying economic trend is weaker than generally acknowledged, and perhaps too much blame is placed upon the strike.

Numerous other strikes have had widespread effects as well— construction workers in Kansas City; carpenters, household appliances, construction machinery, and other autos in the Chicago District; and airlines in the Minneapolis District.

Weakness in the employment picture is traceable to strikes as well as to cutbacks in government spending affecting the aerospace and aircraft industries in the Atlanta and San Francisco Districts. Also blamed for layoffs are cutbacks in business capital spending affecting the machine tool industry in the Boston and Cleveland Districts, and the computer industry in the Cleveland and Minneapolis Districts. Slackening steel production is a source of weakness in the Cleveland District, and the textile industry has accounted for some sluggishness in the Richmond and Atlanta Districts. A less-than-seasonal buildup of employment by retailers is also mentioned.

District reports describe consumer spending variously from satisfactory to very bad. The consensus is clearly less than satisfactory, particularly for "big ticket" items. Only the Chicago District describes the outlook for consumer durable purchases as optimistic. Retailers' inventories are generally being held down, and holiday season buildups are apparently lower than usual.

Residential construction is reported to be improved in the St. Louis, Minneapolis, and Kansas City Districts. In the latter case, the improvement follows a prolonged strike in several of the building trades. Residential building continues weak, however, in the Boston, Richmond, Atlanta, and San Francisco Districts.

While the liquidity positions of financial institutions are reported to have improved, the consensus of the reports is that loan demand remains weak. In some Districts this is reported to have led to greater investment in municipal securities by banks, and there is some speculation about the possibility of an imminent cut in the prime rate.

Some moderation in the growth of prices is mentioned in the Richmond, Chicago, Dallas, and San Francisco reports. In some areas, consumers are continuing to shift to lower-to-medium priced goods, and price shading of consumer items is reported. Concern continues to be voiced, however, about the problem of controlling inflation in view of recent labor settlements which have resulted in large wage increases, for example, in the St. Louis and Kansas City Districts. Increases in gas and electric utility rates and in prices of public services are of concern in the Atlanta District. The potential need for incomes policies in order to control inflation in the face of rising unemployment and continued upward pressure on wages is mentioned by respondents to surveys in the Boston and Philadelphia Districts.