The economy is showing the continuing effects of the policies of monetary and fiscal restraint actively pursued during the past year. The rate of growth of total spending has slowed since last summer, real product has declined slightly, and industrial production has fallen moderately. Employment growth has slackened and unemployment has increased. The primary goal of reduced inflation has not yet been achieved, however, as upward pressure accumulated over the past five years continues to be a powerful influence on current prices. The rate of price increase can be expected to moderate only after the reduced pace of spending and of real economic activity begins to overcome the momentum of inflation.