District reports continue to suggest that the cross-currents which have characterized the economic outlook in the recent past remained in evidence in early March. While assessments were mixed, the overall impression which emerged was that of a still generally robust economy, with some areas of weakness in business activity. Business demand for plant and equipment continues to show great strength, although output is being hampered by shortages, not only of energy, but of many raw materials and semi-finished products. Consumer demand seems to be holding up well, aside from the well-publicized weakness in large automobile sales, but production of consumer goods also is being hampered by materials shortages. On the other hand, residential construction remains depressed, and a number of Districts report some rise in unemployment. The demand for bank credit remains mixed.

Regarding consumer spending, a decline in automobile sales, and in some instances a weakening of consumer demand for other durable goods, was mentioned by a number of Districts. On the whole, however, retail sales were reported strong by St. Louis and better than expected by New York. Sales were also reported strong in most parts of the Richmond District, although there were indications that business at suburban outlets was adversely affected by the gasoline shortage. Philadelphia reports that sales declined in February but that retailers are cautiously forecasting an improvement in March. Respondents in the Boston District reported production of consumer goods to be slack, partly reflecting reduced demand, but also because of materials shortages. Dallas reported generally strong department store sales, but some weakening at stores specializing in more expensive products, as well as sharply slower unit sales of the more expensive food items, notably meat, at retail food stores. Similarly, Kansas City attributes the recent sharp decline in livestock prices partly to sluggish consumer demand for meat. Several Districts, including Boston, Richmond, and Atlanta, report weaknesses in tourism and recreation related businesses, while Kansas City refers to generally poor power boat sales.

In the building sector, residential construction is termed weak by Atlanta, severely depressed by Cleveland, and falling by San Francisco, while Chicago reports that commercial and public construction has been weaker than expected. House-builders in the Dallas District, however, anticipate a strong turnaround in residential construction by midyear, while several Districts, including Cleveland, Chicago, and San Francisco, characterize industrial construction as strong, reflecting businesses! efforts to expand capacity.

Indeed, most Districts paint a strong capital investment picture. Among others, Boston notes that capital goods orders are very strong and backlogs high; 40 percent of the respondents to the Philadelphia survey of manufacturers expect to boost their capital outlays over the next six months. Chicago terms the demand for machinery as intense, while capital goods producers in the Cleveland area are more optimistic over the outlook for 1974 than they were a month ago.

Good prospects for agriculture were also generally reported by most Districts in agricultural areas, dimmed somewhat, however, by potential shortages of fertilizers, farm equipment, and fuel. Minneapolis, however, notes that fertilizers may have been stockpiled, that many farmers have tended to overfertilize and if available fertilizer is used more efficiently, crop yields may not be affected.

As in previous months, growing shortages of industrial items were also reported by most Districts. Among others, St. Louis mentions that many firms report "frantic" searches for raw material. Steel economists in the Cleveland District state that the demand for steel continues to exceed capacity. Chicago and Richmond report the shortage situation to be a major problem. In this context, respondents in the Minneapolis District felt that price and wage controls have contributed to bringing about existing shortages, and should be eliminated. Similar sentiments were expressed by New York respondents.

Regarding bank credit developments, Kansas City and Richmond report a strong loan demand, but Philadelphia and St. Louis report a softening of demand while a mixed picture appears to characterize the situation in the Atlanta and San Francisco Districts.