May 17, 1972
Economic activity in the Eighth District continues up at a moderate rate according to a selected group of businessmen. Manufacturing continues to expand at about the same rate as in recent months. Construction, while leveling off from the rapid growth rates of the past year, remains at very high levels in most of the District. Total employment is increasing moderately. The outlook for agriculture is optimistic. Investments in equipment and plant modernization are on the upswing, but profit prospects are still not sufficient to provide incentive for major investment programs. Business loans at banks are expanding moderately, and savings are continuing to flow into financial agencies at a high rate. On the less optimistic side, growth of sales at major department stores has apparently leveled off in recent weeks, and unemployment in the St. Louis SMSA remains near the relatively high U.S. rate.
Manufacturing firms in the District report that sales and orders continue to expand moderately. No recent layoffs were indicated, and some firms have increased employment. All manufacturers interviewed report considerable optimism as to the business outlook for the remainder of 1972.
Construction continues at a high rate throughout most of the District. Both commercial and residential construction is approaching record levels in many areas of the District. The St. Louis SMSA is, however, an exception. Single family homebuilding in the St. Louis SMSA is up from 1971, but multi-family and commercial construction activity is very low. One-third of the construction work force in St. Louis is estimated to be out of work, as home building can absorb only a small portion of the idled commercial construction workers.
The outlook for farm income in the Eighth District remains optimistic. Weather conditions have been satisfactory, and current price levels for farm products point to the possibility of substantial increases in net farm income for the year. As a result of high income expectations, sales of farm production items are well above year-ago levels.
While investments in plant modernization and equipment continue to expand, little interest has developed in overall plant expansion. Most businessmen report that profit margins are still too low to provide incentive for major plant expansion. Some complain that sales can only be made at profitless levels.
Although still viewed as satisfactory, sales of major department stores have apparently leveled off in recent weeks. Furthermore, retailers report that it is increasingly difficult to make a profit. Nevertheless, this is one area where some new investments are taking place, even in the St. Louis SMSA. A number of new shopping centers are under construction around the fringe areas of the City of St. Louis, but this additional space is partially offset by inner city vacancies.
Bank credit for commercial purposes has begun to increase moderately in recent weeks. Lending officers at District banks report that interest rates on such loans are expected to strengthen in the months ahead as demand for credit expands. Funds at savings and loan associations remain abundant, but no further reductions in mortgage rates are expected.