Initial reaction of Seventh District bankers and businessmen to the wage-price freeze and other actions and proposals of the Administration announced on August 15 appears to have been generally favorable. Producers of motor vehicles and business equipment are especially pleased, mainly because of proposed tax changes. An academic economist with a wide following, however, called the freeze "cosmetic rather than therapeutic," but the more common reaction is that the Nation's economic problems—the wage-price spiral, unemployment, and the trade balance—were not diminishing, and that strong words and actions were needed. Sentiment is bolstered, perhaps only temporarily, by the thought that "something is being done."

Opinions expressed by a group of economists representing major District businesses and financial institutions at a recent meeting were relatively optimistic. Increases of $100 billion in GNP were foreseen for 1972—a rise of more than 9 percent from 1971, about 5 percent price and 4 1/2 percent real. Inventory building is expected to accelerate in the fourth quarter, and plant and equipment spending is expected to revive by mid-1972. Managers in the various organizations are generally more bearish than economists. Cautious policies on capital expenditures, inventories, and hirings could change if orders and profits improve.

Employment conditions appear to have stabilized in the District, except for the hard-hit steel producing areas. Layoffs in most areas are about balancing new hires. Workers of all types and skills are in ample supply throughout the region. Unemployment in the automotive centers remains very high with no sign of early improvement. Strike activity is much less evident than at any time this year.

Retailers appear to be fairly well pleased with recent sales volume. Inventories are reported to be in good balance, and orders for some household durables are said to be picking up.

Although orders for most types of business equipment remain depressed, trucks are selling well—especially light and
extra-heavy trucks. Demand for both construction and farm equipment is significantly ahead of last year. Foreign sales of these products are down, however, both in developed and in underdeveloped nations.

Orders for steel are at very low levels currently. The drop in orders and output is much steeper than in 1968, and greater in the Chicago area than in the Nation, although steel consumption is up to expectations. Large inventories, heavy imports still to come, the belief that proposed price increases will be postponed, and the fact that mills are not financing customer inventories (as in 1968) are said to be responsible. In contrast, Detroit area production is holding up well.

Chicago area steel mills have begun to recall some of the 30,000 workers laid off in early August as primary operations, shut down for the strike deadline, are reactivated. Monday, however, the mayor of Gary, Indiana (heavily dependent on steel) reported that his city had a 30 percent unemployment rate—far above the state labor department estimates. The mayor wants federal help.

Home building continues strong in the District. Analysts now expect almost 1.9 million starts this year, and almost as many in 1972, if federal programs are pushed. A major producer of building materials states that three price increases have "stuck" this year. Factories of this firm are on three shifts, and customers have been placed on allocation.

Sales of industrial chemicals have picked up vigorously in recent months after a slow start earlier in the year. Prices of these chemicals have increased slightly, and further increases are expected in 1972 as supplies tighten up. Chemical prices had declined sharply in the late 1960's.

Reports from the corn belt indicate that blight damage has not been severe, and that a record harvest is anticipated.
If present trends continue, the corn crop will be largely out of danger in two to three weeks. Business loan demand at commercial banks remains moderate, but some banks have noted a recent improvement. The commercial paper market is competing vigorously with banks to supply short-term business funds. The volume of new corporate security issues is expected to continue to decline (except for utilities), but most analysts think long-term interest rates will not fall significantly. Inflows of funds to passbook savings accounts have slowed, and some individuals are "disintermediating" again. Banks are having difficulty placing CD's of more than 90 days because investors wish to remain short.