June 11, 1975
District businessmen continue to express optimism about the prospects for an economic recovery in the second half of this year. Several industries already report some turnaround in orders. So far, however, no great surge in consumer demand is being reported. The two big problem areas throughout this recession, automobiles and housing, continue to be sluggish. Savings funds continue to flow rapidly into thrift institutions, although mortgage demand remains weak. Farming operations are proceeding at a rapid pace, and with better than average crop prospects, increases in livestock feeding are likely later this year.
Department store sales have apparently remained unchanged in real terms in recent weeks. One large St. Louis retailer reported fairly strong sales aided by considerable advertising and price cutting. Others, however, reported no sales gains. An aggressively managed appliance dealership reported that sales had held up fairly well in recent months, despite the generally low sales volume for the industry. This firm also noted a fairly large increase in sales in the past couple of weeks. Sales of some consumer durables, such as automobiles, continue sluggish, while sales of home entertainment equipment, such as television and hi-fi equipment, are reported to have picked up recently. Lawn and garden equipment sales are also reported to be above year-ago levels.
Several signs continue positive in the manufacturing sector of the district economy. Those industries reporting some recent pickup in orders include chemicals, paints and coatings, food service equipment, and clothing. Inventories have been reduced substantially in a number of industries, and the current increases in factory orders are believed to represent anticipated increases in final demand in the second half of this year. Reports from capital goods firms are mixed. A manufacturer of pumps and lubrication equipment reported strong sales and continued unfilled orders, while a manufacturer of welding and cutting equipment reported a sharp drop in sales.
Other areas of activity, such as mining and roadbuilding, are reported to be doing fairly well. Commercial construction is currently fairly strong in the St. Louis area, although this is not representative of the entire district. Residential housing has shown only slight improvement in recent weeks.
Unemployment has increased in the district much like in the United States as a whole. Representatives of several industries report having recalled workers in the past several weeks, but layoffs in other industries plus normal increases in the labor force have led to a further increase in unemployment on a seasonally adjusted basis.
Mortgage funds are currently available at lower rates than earlier in the year. Rates have held steady in the past couple of months, although S&Ls report continuing downward pressure on rates. This pressure has been resisted due to the anticipation of a turnaround in rates later in the year. S&Ls also report a marked change in the composition of their savings inflows from CDs to passbook savings. One S&L representative believes that this reflects the desire of savers to be in a liquid position so they could take advantage of higher rates in the future. Mortgage demand is still reported to be weak, although some slight improvement was noted. Demand for business and consumer loans is also sluggish. Total loans outstanding at large commercial banks in the district, including both business and consumer loans, have continued to drift downward in recent weeks.
The pace of plantings of this year's crops has been somewhat above average for recent years over most of the district. Given normal weather, large crops and probably somewhat lower food and feed grain prices are in prospect for later in the year. With recent increases in livestock prices, the stage is being set for a pickup in livestock feeding this fall and winter. Pork supplies may become tight later in the summer, however, as hog producers, responding to the more favorable feedings ratios, will tend to hold back gilts for breeding purposes.