While the reports of the Federal Reserve Banks indicate that the pace of economic activity may have slowed somewhat in recent weeks, the current situation is highlighted by growing demand pressures, material shortages, problems of inadequate capacity, and increased rationing of raw and semi-finished products by the private sector. In the agricultural sector, large crops and increased food supplies are in prospect.

The energy crisis is a topic of prime concern to businessmen throughout the country. Several Reserve Banks report business slowdowns in their Districts resulting from fuel shortages, and respondents in many Districts fear that layoffs of workers will worsen. Dallas reports that oil production in Texas is falling and that present stocks of oil in that state are only sufficient to last through the first severe cold spell. Diesel fuel shortages are being felt in some areas. Atlanta reports that a recent cutback in diesel fuel allotments will reduce coal deliveries to TVA, thus contributing to a power shortage. Cleveland reports that the petrochemical and rubber industries are being adversely affected by lack of oil and that steel production may be curtailed in the months ahead. Chicago reports that industrial users of natural gas and propane may be cut off, but major electric utilities in the Seventh District appear to be in a relatively good position because of the use of coal and nuclear energy.

In addition to the concern about energy, shortages of other materials are widely reported. New York reports shortages in zinc and copper which approach "Korean War proportions". Labor, paper, steel products, and various other raw materials are reported to be in short supply in many areas. An increasing number of firms in the St. Louis District report rationing of a wide variety of raw materials by their suppliers, and Cleveland indicates that a three to six-month delivery period is common for many products.

Manufacturing activity continues generally strong, but some Districts report a slowing in the rate of increase. Chicago indicates that lack of supplies and manpower, rather than lack of demand, is responsible for the slowing. Capital goods industries are especially strong, as investment spending continues at a high level. Reports from New York and St. Louis suggest that much of the investment may be for mandatory pollution control equipment rather than for projects which will increase productive capacity, Many investment projects in the Atlanta District are being delayed, largely as a result of shortages. Continued high capital spending in agriculture is projected in the New York District, and Chicago reports that farm equipment firms are "swamped" by orders.

Retail sales generally continue at high levels, although some of the Federal Reserve Banks indicate a slowing in consumer demand. This was noted particularly for automobiles and consumer durables.

Employment generally continues at high levels, with many Districts reporting labor shortages. For example, Dallas reports a sharp rise in employment in recent months, led by increases in construction and government employment; unemployment in the Dallas District remains around 4 percent. By contrast, Boston describes the New England employment picture as "bleak", with September unemployment about 6-1/2 percent in the region and 7-1/2 percent in Massachusetts.

The agricultural situation is good with high crop yields and large farm incomes in prospect. Many Districts report that crop harvesting is progressing rapidly. Livestock production in the Dallas District is slightly higher than last year, and the Florida citrus crop is the second largest on record. Chicago reports that, in the last year, value of farmland has experienced the largest increase in 20 years.

Construction activity is down in many areas, but commercial construction has held up better than residential. A number of the Federal Reserve Banks reported that construction is being retarded by material shortages, late deliveries and uncertainties stemming from rapid price changes.

Interest rates have in some cases declined in recent weeks, reflecting a decrease in bank loan demand, especially for commercial loans. Both San Francisco and St. Louis, for example, reported that the lower business loan demand may reflect the substitution of commercial paper for bank loans. Some Reserve Banks report increased availability of mortgage funds, but the movement in mortgage rates is apparently mixed. Usury laws in some states have tended to limit the supply of mortgage funds. Chicago reports that the 8 percent usury law in Illinois continues to limit new loans. New York reports an increase in the supply of mortgage funds resulting from the raising of the state usury ceiling from
8 to 8-1/2 percent.