Seventh District capital goods producers report that the capital goods boom continues at full throttle. Shortages of metals, chemicals, packaging materials, components, trained manpower, and transportation continue to impede output in many sectors, with no improvement in sight. A variety of strikes also have slowed output growth. Fuel shortages are no longer an immediate concern to businesses and consumers. Retail sales generally have been better than expected. The market for large cars has improved, and the boom in small cars may have ended, at least temporarily. Sales of recreational vehicles have increased sharply from the extremely low level of the start of the year. Price increases for manufactured goods and services have come "thick and fast" since the end of controls on May 1. Hopes for a revival of home-building have been hard hit by high interest rates and substantial outflows of savings from S&L's since the last third of March. Prospects for record crops in the Corn Belt are excellent with field work well ahead of normal.

Aside from home-building, very high interest rates are causing widespread apprehension. Apparently to allay fears, the large Chicago banks made statements on May 13 that emphasized that funds will be available, although at high cost. There are private reports that builders have not repaid construction loans on schedule, because of large inventories of unsold houses. Otherwise there is little evidence that collections on business receivables have slowed. In fact, some firms report that collections have improved.

Many firms are experimenting with new escalator clauses to cover rising costs, having found that existing arrangements were inadequate. On long lead-time items, one firm has announced that prices will be advanced one percent per month after the fourth month. Other firms have abandoned fixed prices, quoting only "estimated" prices, or, more commonly, "price at time of delivery."

Commonly, business firms that had expected a slump in demand for their products in the first quarter found that actual results were relatively favorable. This is true of both producer and consumer goods. Although some businessmen are worried about a renewed decline in the general economy, they appear to be a relatively small minority. Nevertheless, there are persistent reports of small firms hard-pressed because of problems of obtaining materials and workers and rapidly rising costs.

The increase in the minimum wage on May 1 seems to have been absorbed without a noticeable impact on the demand for workers. The recent steel settlement is said to increase labor costs by 40 percent in three years, and this package is likely to be demanded in other areas. There has been upward pressure on white collar wages and salaries since decontrol. Many of the large firms had been following the guidelines "more or less." New claims for unemployment compensation eased in District states in April, as compared with the first quarter, but were still above last year in most localities. In most areas, these claims have been boosted mainly by lay-off s in the motor vehicle and petroleum-related industries and do not appear to have spread in a cumulative fashion.

The most important material shortage clearly is now steel. Because of production difficulties earlier in the year many steel deliveries have been behind schedule. As a result, allocations to most users have been reduced for the third quarter. Output of steel will be lower in the third quarter because of needed maintenance and vacations. The auto firms are pressing for delivery of additional steel for large car production which has increased. Foreign steel is much less available despite prices far above domestic levels. Exports of steel have increased somewhat, but this is not a large factor in the supply situation, particularly in the Midwest.

Although demand for virtually all types of producer equipment is intense, with delivery times stretching out still further, the picture is particularly tight for farm equipment, heavy construction equipment, heavy trucks, freight cars, machine tools and traveling cranes needed for new factories and utility generating stations.

Farm loan demand remains exceptionally strong, although demand for feeder cattle loans has slackened. Rural banks are shouldering a larger share of the farm loan demand because trade credit has become less available in a period of tight money and short supplies of fertilizer and other products sold to farms. Farmland values rose sharply again in the first quarter. District bankers reports indicate farmland prices averaged 34 percent above year-ago on April 1. Corn Belt farmers had completed 27 percent of their intended corn planting by May 5, up from only 6 percent a year earlier and the 5-year average of 18 percent. Because of curtailed feeding operations for both hogs and cattle, most analysts expect higher prices for red meat later in 1974.