June 14, 1972
A sample of Eighth District businessmen reports improved sales and expects future moderate gains. Employment is holding steady in the major cities, while smaller metropolitan areas are reporting additional hirings. Firms that compete with foreign suppliers are more optimistic since they are beginning to feel some effects of the dollar devaluation. Farmers in some areas of the district are experiencing adverse weather conditions. Retail sales have improved over last year and the housing industry continues to show strong advances. Credit is plentiful as savings continue to flow into thrift institutions at a high rate. Loan demands by businesses have increased in recent weeks.
Manufacturing firms in the St. Louis metropolitan area that supply customers in national markets are generally more optimistic than locally-oriented firms, except those related to residential construction activity. A large food processing firm is experiencing the expected modest increase in sales and feels prospects are good for the remainder of the year. Shoe manufacturing plants are at full capacity, but expect no additional employment at this time. The dollar devaluation and inflations in foreign countries have made the shoe industry optimistic about further advances in sales because they now have a better competitive position with respect to imports. Suppliers in hotel, restaurant and airline industries are continuing to experience an uptrend in business, reflecting improvement in these leisure-service industries.
Farmers in many areas of the Eighth District are experiencing poor weather conditions. A drought situation is developing in the northern half of the district and is seriously hurting newly planted crops. In some areas of the central Mississippi Valley, rains and floods have slowed the planting of crops. Strong sales of farm equipment are reported. Sales of one large manufacturer of agricultural equipment are up 25 percent from last year and the firm feels a solid basis for further growth is present. Retail sales exceed the slow pace of last summer, but are still not as high as hoped. Retailers generally feel sales will improve with economic conditions. Stores in the downtown area of major cities have been experiencing poor sales performance.
The construction industry is still a bright spot. The pace of housing construction is good, but commercial construction is sluggish. The continued strong pace of home construction is making builders optimistic as they move into the summer, typically their busiest season. Building suppliers' sales are up over a year ago, and in some cases further hirings are planned if sales continue upward through the remainder of the year.
Housing credit remains plentiful as savings continue to flow into S&Ls at the high rates of the past few months. Expected slowing of the rate of savings inflows has not occurred, and as a result mortgage rates in the district are generally holding steady, with slight declines reported in some areas.
Loan demands at eight district banks are strong, especially for commercial and industrial loans. One major bank reports loan demands increased by 6 percent in the last four weeks and expects strong loan demands to continue. Bankers see the prime rate rising by the end of the year to perhaps 6 percent.