September 13, 1972
According to our directors, economic activity in the Twelfth District continues to grow at the rates established in recent months, and no slowing is foreseen in the rest of this year. Among the more important sectors in stimulating this advance are retail sales-including automobiles-construction, and agriculture. As a result, unemployment rates have been lowered still further. Bankers report steady loan demand and little change in interest rates.
Consumer spending is strong throughout the District. In Tacoma, retail sales in July equaled the previous 1968-69 peak despite a local unemployment rate of 10 percent. Southern California merchants are described as experiencing much better business than in 1971, and they expect continued improvement in the rest of 1972. Automobiles, in particular, have benefited from the greater consumer spending. In Tacoma, the number of automobiles sold was 13 percent above the same period in the previous year and, in Los Angeles, dealers describe their sales as excellent. Some dealers had a "sell-out month" in August for 1972 models, and they are going into the new-model year with low inventories and optimistic expectations. Both domestic and imported cars are sharing in these gains.
Agricultural prospects similarly are good in most District states. Livestock prices are expected to remain high, and the only problem for ranchers appears to be a shortage of feeder cattle in some areas. Potato prices are reported at being at an "all-time high", and good crops are being harvested in Idaho and Washington. Above-average prices exist for other vegetables and fruit crops. In some cases, the prices reflect smaller plantings, and in others, such as fruits, the higher prices are due to smaller crops caused by bad weather. Good yields are in prospect for such crops as wheat, corn, and sugar beets.
Lumbering activity remains high in the Pacific Northwest, as the leveling-off in national construction activity is being offset by stronger demand for wood products from other sectors of the economy. The continued strength in the timber industry has been an important factor in lowering unemployment, especially in Washington.
Construction in most parts of the District remains at a generally high level. There are, however, variations by region and by type of construction activity. Residential construction is buoyant in most areas, and in some cities, such as Salt Lake City, is at record levels. One exception is Alaska where a decline in residential construction has occurred, but this has been offset by more commercial projects. Commercial construction, with the possible exception of office buildings in some cities, is continuing to rise. Government construction is strongest for highways but relatively weak for public buildings and schools. Apartments are the only construction category which appears to show signs of weakness. Our directors in the Los Angeles area, Idaho, Spokane, and Portland report various signs of overbuilding. Vacancy rates are climbing, and in one city several savings and loan associations have stopped making loans for apartment construction. The overall consensus is that construction will maintain its current levels for the rest of 1972.
Little change has occurred in District banking conditions. Loan demand especially for business loans remains strong, and moderate increases in deposits, with a few exceptions, are reported. Some bankers expect a slight increase in interest rates but not a major change.