Economic conditions in the District apparently are continuing to improve. Businessmen that were surveyed expressed reserved optimism about future prospects. Although sales at retail stores and auto dealers are somewhat higher than a year ago, much of this optimism is based on reports of a turnaround in the national economic situation and on surveys which suggest that consumer attitudes have become more favorable to buying. Construction activity continues to pace the area economy. Dry weather has severely damaged crops in the southern part of the District, but production prospects remain favorable in most other areas. The employment situation is still soft and only modest improvement is expected in coming months. Loan demand continues to display a slight firming trend at District banks, and deposit inflows continue strong. The prime rate increase was generally followed throughout the District, although some banks delayed their announcements.
A survey of large retail stores in the District indicates that retail sales so far this year are slightly ahead of the same period a year ago. With Easter late this year, April sales have been quite good and many retailers said that they were better than expected. It appears from the responses that consumers have not begun to increase their buying of big ticket items significantly. A couple of stores did indicate that their furniture sales were very good. Also, there have been reports that color TV sets have sold well this year. Retail sales in Wichita are still poor, due to the high unemployment in the local aircraft industry. Stores in Colorado say that their sales have been very good. In Oklahoma, despite reports of increased consumer caution in some areas, due to drought conditions, retail sales in Oklahoma City and Tulsa were said to be increasing. Optimism among merchants in the District was widespread. Many cited the improved April figures as support for this optimism. But as noted earlier, many drew their optimism from developments on the national level. Some said that they were heartened by recent consumer surveys. One retailer said that the improved foreign political climate would probably affect consumer buying attitudes favorably. No one seemed to expect that there would be any great surge of buying, but, instead, a gradual increase throughout the rest of the year.
Auto sales have improved in recent months throughout the District. Reports on sales in recent weeks are mixed, although several dealers did report a pickup in momentum. The happiest dealers are those handling imports. Buyers still seem to be interested in smaller and cheaper models. One dealer reported that a significantly large proportion of cars sold are cheaper models with less equipment. Generally, dealers were optimistic about auto sales in future months. One dealer said that lower bank rates on auto loans were starting to help sales. Again, the expectation is for a gradual, rather than a rapid, increase in sales.
The drought conditions prevailing in the central part of the United States have had an effect on District agriculture. In Oklahoma, 99 per cent of the winter wheat crop is reported to be in poor to fair condition. In the hardest hit southwestern part of the state many fields have been abandoned and grazed out with cattle. Native pastures are in very poor condition. It is also reported that 80 per cent of the dryland wheat in New Mexico has been lost. Although some rain fell in these areas during the past week, the outlook remains bleak unless additional precipitation is received soon. Dry soil conditions have also affected parts of Colorado, Kansas, and Missouri, but losses have not been nearly as great as farther south. Wyoming and Nebraska have good moisture conditions.
The slight firming in loan demand reported in March appears to have held at Tenth District banks. Construction loan demand remains the major area of strength. Auto loan demand is also continuing to show strength, although not as much as would be indicated by auto sales. Buyers are apparently making unusually large down payments. Some pickup was reported in other consumer installment loans, but not much.
Business loan demand for national concerns remains sluggish. Some bankers report that some national accounts have requested larger credit lines, but have not used them as yet. Demand from local borrowers continues to show moderate strength. The increase in the prime rate was welcomed by bankers interviewed; it was justified more by deposit rate levels than by strengthening loan demand.
Deposit inflows continue strong at District banks, considering seasonal factors. In March, some banks were anticipating a decline in rates paid on consumer time deposits and some scattered declines had occurred. This picture has changed somewhat. In some cases, those declines that occurred earlier have been reversed, and rates have firmed. There is less talk of declines in rates paid on consumer time deposits; however, such talk has not disappeared. In general, bankers continue to expect a gradual strengthening in loan demand as a result of increased economic activity, and are reluctant to discourage deposit growth at this time.