Reports of sustained current strength continue to coexist with expectations of a future slowdown. Consumer spending and the demand for consumer loans have maintained their recent pace of growth. Business investment and foreign demand are buoyant and are expected to remain strong into the future. Only residential construction has weakened, though business and public construction has partly offset housing declines. Shortages of material, skilled labor, and mortgage funds are widespread. The unavailability of some materials is traced to the economic controls program. Small changes in employment have occurred. With a few exceptions, business loan demand has strengthened. With thrift institutions experiencing deposit losses, some loans have been made to nonbank intermediaries. Despite damages due to Delia and drought, agricultural output, prices, and income are reported to be high. Greater stability in food prices is expected in the future.

With the exception of large automobiles, consumer demand has been brisk in most Districts. Minneapolis and Atlanta report that controls have not produced the feared curtailment of planned business investment, but St. Louis and Chicago suggest controls may be hampering capacity expansion in sectors such as the paper industry. San Francisco and Kansas City report inventories generally below desired levels but reports from the Richmond, Philadelphia, and Cleveland Banks do not expect major inventory buildups in the future. The Cleveland and Chicago Districts have experienced intense foreign demand for steel and many "bargain" U. S. materials. Lack of mortgage funds has reduced residential construction activity in most Districts.

Shortages are reported by the New York, Atlanta, Chicago, St. Louis and Kansas City Banks. In the Kansas City District, lead times are considerably above normal, and lengthening. In St. Louis, manufacturing is at or near its capacity levels. Chicago, which has been experiencing strong demand for a wide variety of goods, indicates that price controls have restricted the supply of petroleum and paper products. Atlanta reports that material shortages have led to plant closings. New York has experienced shortages of skilled labor. In Chicago and Atlanta, the labor shortage includes unskilled labor as well. Nevertheless, most Districts reported only minor gains in employment.

A near-term slowdown is expected by the directors and businessmen in the Boston, New York, Philadelphia, Cleveland, Richmond, and Minneapolis Districts. A Boston director notes a convergence of opinions on the economic outlook very close to the consensus view of the business economists in the Fourth District--a "growth" but not "classical" recession. New orders have started to level off in the Philadelphia and Richmond Districts, though they continue to rise in other areas. According to the reports from New York, Cleveland, and Minneapolis, the tapering will center in the consumer spending area.

The outlook for agricultural incomes and crops, particularly soybeans, remains good. Drought in the West and tropical storm Delia in the Gulf have destroyed some of the wheat, rice, cotton, and soybean crops. High poultry prices have stimulated supply in the Southeast. The Dallas Bank notes that the number of cattle and calves on feed in the Southwest was down from July but well above last year. Cattle placements and slaughter were, however, down from last month and last year. The Kansas City Bank indicates that "on balance, food prices should tend to stabilize in coming months, but hoped-for declines of a significant magnitude are still sometime off."

Business loan demand was strong in most districts. Both Dallas and Kansas City, however, report some decreases. The pace of disintermediation is widely reported to have accelerated in August. Except in St. Louis, where most prospective home purchasers can obtain mortgage credit, mortgage availability and terms have become increasingly stringent.