October 10, 1973
Economic activity in the Eighth Federal Reserve District continued to rise in recent weeks, but the rate of increase has apparently slowed. Retail sales at major stores grew less rapidly in September than in earlier months. Residential construction is down throughout the district, but commercial construction continues at a relatively high level. Manufacturing plants continue to operate at capacity levels, and many shortages of raw materials are still reported. Unemployment remains relatively low, and labor shortages are still reported in most areas. The outlook is very good for agriculture. Net farm income may exceed the previous record level by 25 percent. Bankers report that loan demand may be slackening, but interest rates on loans at the major banks and savings and loan associations have not declined.
Although representatives of major retail stores reported that sales remain at a high level on a seasonally adjusted basis, the uptrend has slackened in recent weeks. Although the St. Louis daily newspapers are on strike, retail stores report that the strike has had very little effect on sales. Retail inventories remain at low levels, and shortages of some items are reported as a result of strikes in manufacturing plants.
Home-building throughout the district is proceeding at a slower rate than earlier in the year. A report from Memphis states that apartment starts have come to a halt. Single-family construction in St. Louis is reported to be down 50 percent from the level of a year ago, and sales since August have been very low. Commercial construction is still at a relatively high rate, and homebuilders are reported to be losing many of their craftsmen to firms in the commercial construction business. Manufacturing activity continues at very high levels, with labor and material shortages reported in many lines of production. An industrial supply firm in St. Louis reported employing two shifts and producing all they can with the raw materials they can get. A St. Louis garment firm reported operations at 100 percent of capacity. A Louisville manufacturer of hardware and appliances reported operations at capacity and shortages in a number of items purchased from other manufacturers. There has been no improvement in the supply situation for paper and paperboard products, and no improvement is foreseen for another year or more. Some firms in this industry are reported to be turning down new business.
Unemployment in the district is very low relative to the average rates of most recent years, and the rate has remained stable for several months. Many firms still report labor shortages. A St. Louis textile manufacturer reported a shortage of workers with several types of skills. Production workers are reported to be in short supply in a number of Arkansas communities, and shortages are reported for lumber and timber-cutting activities throughout the district.
According to some private estimates, net farm income in the nation this year may total $25 billion, and exceed the previous record of last year by 25 percent. Prices of farm products are at record levels. Large acreages were planted in most crops, and the current crop condition is good to excellent. Only the harvesting remains. Nevertheless, the supply of most crops is not expected to be sufficient to reduce prices very much in view of the depletion of inventories last year and the continuing high demand for farm products in the United States and abroad.
Loan demand remains generally strong but there are indications that it may be slackening. A major St. Louis bank reported that commercial loan demand may have eased off slightly in the last two weeks. Credit stringency, however, is still reported in the residential mortgage market. Most of the savings and loan associations in St. Louis had a net outflow of savings last month which averaged about one-half of one percent of the savings in all of the associations in the area. In consequence, only a few associations in the area have funds to loan at the present time.