September 15, 1971
A moderate uptrend of business activity continues in the Eighth Federal Reserve District. Businessmen report some improvement in the economic atmosphere as a result of the President's new economic program.
Most manufacturing industries in the District have gradually
increased their rate of operations in recent weeks. One box board
company reports that it is operating with some overtime now, whereas
in the early summer months overtime was eliminated altogether. A
number of other firms which were operating at less than full time
are now back on a
forty-hour week. Most firms, however, indicate
that they are operating at less than plant capacity and have no
immediate plans for plant expansion.
All industries associated with home building generally remain strong. Housing starts continue at a high rate, and such activity is having a favorable effect on both the industries that manufacture building supplies and those that manufacture refrigerators, stoves, and other appliances for furnishing new homes.
Despite the general uptrend, layoffs and rising unemployment were reported in some scattered geographic areas. For example, one plant which produces flash bulbs in a small Eighth District community reports a 50 percent reduction in its work force, which had a major impact on the community's economy. In contrast, another small community reported an unemployment rate in excess of 20 percent in April as a result of a major reduction in the work force at two specialized firms, but at the most recent reporting date the rate had declined to about 14 percent.
Retail sales continue to move moderately upward in most major centers in the Eighth District. Memphis reports a significant increase in sales during the past ten days. Major retailers in St. Louis report little change in sales, but quickly add that there has been a rising number of competitors in the area and that individual firm data are a poor indicator of total sales.
Bank loan demand remains almost unchanged after adjustment for seasonal factors. Increases in loans to primary metals produced in recent weeks were offset by net repayments by commodity dealers. Most banks interviewed expect a moderate strengthening in loan demand during the next few months. Bank deposits of large member banks have declined slightly in recent weeks, but savings and loan associations report savings inflows are again at a high rate following a dip in July.
Most firms interviewed expressed a favorable attitude toward the President's new economic program. Representative comments were that it was long overdue, it should not be placed on a voluntary basis, and there will be a surge in prices once the freeze is lifted. Some expect to benefit over the longer run from the higher tariff on imports. It was pointed out that such gains will not come immediately because of the established channels of trade and the numerous contracts which have already been placed with foreign firms for goods. American manufacturers will thus require several months to recapture these markets.
All the firms which commented on the program are well pleased with the investment tax credit and excise tax reduction proposals. An official of one manufacturing establishment reports that his company has already started plans for the installation of some new equipment in anticipation of the more favorable tax treatment.