Judging from the responses of the directors, recent developments in the steel and rail industries will lead to higher costs and prices for goods coming into or produced in the District. The timing of these cost and price increases will vary, with some already having taken place and more to come between now and the end of the year. Labor demand throughout the District is still relatively weak, although a few directors thought that business activity was generally good. Consumer savings flows to District banks have slowed down since midyear, and bankers are anticipating only minimal increases over the next few months. Business loan demand is expected to follow normal patterns over the next several months.

A number of directors were aware of price and cost increases that had already been instituted as a result of the recently announced steel price hike. An equipment dealer in Upper Michigan, following the steel price rise, raised the price of fencing even though it had been purchased earlier this year. One Montana director said that a steel fabricator in his area would try to raise prices on his products to pay the costs of holding excess inventories, but the fabricator was not sure that competition would permit the higher prices to hold.

In addition, price increases can be anticipated in a number of steel-using products between now and the end of the year. One director stated that reinforcement steel prices had risen about 5 percent, but that he had adequate supplies to hold the price on his concrete products until the end of the year. At that time, though, the steel price increase along with a 10 percent announced price increase for cement and higher wage costs would force him to take a long, hard look at these prices.

Another director said that a heavy equipment manufacturer in his area had stockpiled enough steel earlier this year to last until December, at which time he would have to raise prices. Farm machinery prices are also expected to rise early next year, partially because of the recent rise in steel prices, but also because the relatively strong farm income situation is leading to a stronger demand for machinery.

Despite the rise in the District help-wanted advertising index, the directors of this Bank generally feel that the demand for labor has not increased significantly over the last few months, and for the most part, only seasonal hiring is taking place. A few directors felt, however, that business activity was good in their areas. Tourist traffic seems to be up throughout the District, and spending by farmers has improved because of the good crop prospects.

Since midyear, consumer-type time and savings deposits at selected Reserve city and country banks have been experiencing only seasonal or weak expansion in contrast to rapid increases earlier in the year. The slowdown was attributed in part to an increasing awareness of alternative higher return investments on the part of savers, increasing competition from government securities and higher offering rates at S&Ls in some parts of the District. Expectations are that changes in consumer savings and time deposits will range from only minimal increases to moderate runoffs during the next several weeks, with any significant declines occurring toward year-end, if short-term rates continue to climb and if consumer reluctance to spend continues to dissipate.

Business loan demand is expected to follow its usual seasonal advance during the next several months, and there are no sectors which stand out as being especially conducive to large-scale expansion in the District. Areas mentioned as possible sources of moderate strength were real estate, public utilities and interim nonresidential construction financing. Bankers are also expecting some increase in loan demand for inventory replacements at both the wholesale and retail levels.