PDF《CONFIDENTIAL (FR)》

80 percent. Lumber suppliers were the major exception to this rule of excess capacity. Sawmills are fully employed, as are the existing kilns, and yet the suppliers cannot meet the demand for dry lumber. Although many machine tooling firms are operating at normal capacity, they vary order backlogs rather than production schedules in response to changing demands;

at this time, the backlogs are small. Professors Eckstein, Samuelson, and Tobin were available for com- ment this month. All noted the weaknesses in the current data―for the first time in several months forecasts are being revised downward. In addi- tion to the weakness in retail sales, the Commerce Department'

s survey of capital spending suggested that the first quarter figures will be revised downward and that the year as a whole will not be as strong as in the McGraw-Hill survey or the previous forecasts. The next DRI forecast will show business fixed investment rising only about

4 percent in real terms. According to Eckstein, the recent data show the upside risk has diminished while the downside risk remains slight;

they confirm that this recovery is a modest one and there is no danger of a runaway boom. All agreed that the Federal funds rate should be held at its present

5 1/2-percent level. To Samuelson, prudent policy is to stand pat until we see whether the weakening is a minor aberration in a strong general pattern. To Eckstein, the economy should be allowed to follow its own dynamic, with no stimulus or restraint from monetary policy: He recommended a monetary policy as uninteresting as possible. While Tobin was willing to accept the current level of short-term rates, he opposed the recent rise be........