Beige Book Report: St Louis
May 14, 1975
The optimism expressed last month by Eighth District businessmen has been reinforced by some further signs of business recovery in recent weeks. Several manufacturing firms reported an upturn in sales. Some plus signs for the homebuilding industry were also reported. Funds continue to flow into thrift institutions at a relatively high rate. After declining through the first quarter of the year, mortgage interest rates have remained stable in recent weeks. Signs of economic recovery were not found in all industries, however. The local steel industry, for example, is apparently just beginning to feel the brunt of the recession as liquidation of inventories by steel processors is under way. Also, retail sales continue sluggish in the district.
Major retailers in the district report that consumers remain very cautious about their purchases. Sales of durable items are reported as depressed. Domestic car sales were reported to be off substantially from the February and March levels. However, sales of used and imported cars as well as trucks are fairly good.
Car dealers are pessimistic about a sizable upturn in car sales in the near future, pointing to uncertainty stemming largely from possible government actions affecting automobiles or fuel supplies.
Some types of manufacturing activity are beginning to pick up as a result of a slight upturn in sales. Representatives of the chemical, clothing, and construction-related industries reported some upturn in activity in recent weeks. Representatives of these industries, however, felt that a good part of the current upturn in sales represents a re-replenishing of inventories which had been pared to a minimum. Until recently, orders were mostly on a hand-to-mouth basis. On the other hand, a steel industry representative reported that steel users are reducing inventories and a turnaround in production is not expected until later in the year. Representatives of several industries reported that some workers have been recalled in recent weeks, although employment levels in most of these firms are still below earlier levels. The unemployment rate generally continued to increase through the first quarter in the Eighth District. Whether this trend has continued in April, in view of reports of rehires, is difficult to assess; however, the reports indicate at least a leveling off in the rate.
Homebuilding in the district is well below year-ago levels. In the St. Louis area, however, it was reported that housing permits for April were about the same as for April 1974 after a sharp decline of 40 to 50 percent from the year-ago level in the first quarter of this year. Mortgage funds continue to flow into thrift institutions at a rapid pace. Mortgage rates are holding at about the levels of the past two months, although some concern was expressed at the prospect of rates rising again in the near future.
In general, loan demand in the district continues sluggish. Consumer installment and real estate loans have declined somewhat in recent weeks, while business loans remained virtually unchanged. At the same time, interest rates have generally remained stable after declining earlier in the year. Demand for farm loans, primarily of the operating type, is strong. Interest rates charged farmers have not changed substantially from last year, although rates on most agricultural loans did not rise as high as rates on other loans.