June 13, 1973
Economic activity continued sharply up in May and early June according to a group of businessmen in the Eighth District. Retail sales continue up, plants are operating at full capacity and in some cases rationing output. The labor market remains "tight," demand for loans is high, and interest rates are rising. Excessive rainfall and floods retarded farming operations and may cause a reduction in the acreage of some crops from intended plantings.
Rising demand and inflation is of increasing concern. Representatives of manufacturers report that selling is no more a problem; now their chief problem is obtaining raw materials and allocating output at current prices. The price outlook is so uncertain that some manufacturers refuse to quote prices for future delivery.
Manufacturing plants are apparently operating at full capacity in all industries, and in some instances arbitrary rationing of products to wholesalers and retailers was reported. Supply relative to demand is apparently shortest in the oil refining, paper and paperboard industries which are rationing output.
Retail sales at major department stores in the District are maintaining their uptrend established more than a year ago. Sales in the mid-city stores are not as strong as elsewhere relative to a year ago but such sales have turned up and the outlook is reported to be generally good.
Payroll employment in the Eighth District has apparently leveled off in recent weeks after rising sharply in late 1972 and early this year. The unemployment rate in most District states and major cities remained relatively low in April averaging below 4 percent and not exceeding 5 percent of the labor force in any state or major city.
Financial firms report that the credit market is very "tight" with upward pressure on interest rates for all types of loans. Savings and loan associations in St. Louis reported that net savings are noticeably down and that residential mortgage rates are rising. Loans at major Eighth District banks have leveled off in recent weeks after rising sharply since mid-1972. Total deposits have been generally unchanged since early April. A small decline in demand deposits was offset by a slight increase in time deposits.
The delay in farming operations became quite critical in late May as a result of excessive rainfall and floods. Corn yields and production generally decline substantially if planting is delayed beyond early June. It is generally believed that most of the intended corn acreage was planted by the end of May except in some flooded and extremely wet areas. A sizable portion of the intended cotton acreage in the Central Mississippi Valley Area was not planted. Most of the shortage is in Southeastern Missouri; Mississippi County, Arkansas; Lake and Dyer Counties, Tennessee and the lower delta counties of Mississippi. In some of these areas less than 50 percent of the intended acreage is believed to be planted and it is now too late for further planting. It is believed that much of the land that was not planted in cotton will be planted to soybeans. However, soybean seed is scarce and high priced which will tend to limit the acreage planted.
Although some of the major buildings in downtown St. Louis apparently were built as a result of tax shelters, we have no evidence of great concern over the proposed change in the tax laws.