August 13, 1975
Area businessmen continue to report that a modest upturn in economic activity is under way in the District. Sales at both the retail and manufacturing levels have improved over the past couple of months. Accompanying the increased activity are improvement in the employment picture and renewed concern about inflation. Funds continue to flow rapidly into thrift institutions, while demand for most types of loans is reported to be up only slightly. Reports concerning the condition of agricultural crops are mixed.
Retail sales continue to make moderate gains. Department store representatives report continued strong sales of soft lines but sluggishness among certain big-ticket items, such as refrigerators and air conditioners. An appliance dealer, however, reported some pickup in overall appliance sales from the levels of last April and May. Automobile dealers report some improvement in sales in the past couple of months, but are quick to point out that sales are still about 20 percent below a year ago. They also report that the trend toward purchase of small economy-type cars, as opposed to full-size cars, continues.
Manufacturing activity continues moderately upward. Manufacturers reporting an upturn in sales include representatives of chemicals, aluminum, lumber, paints and coatings, and certain construction items. A major aircraft manufacturer reported that the outlook for this industry is good. Foreign sales of military aircraft plus United States defense contracts have more than offset the declines experienced in the commercial aircraft market. Commercial aircraft sales are 10 to 15 percent below the 1974 level. This market is expected to recover somewhat as the economy picks up strength, although some excess capacity in the industry may keep it depressed through the rest of the year.
Inflation has reemerged as a major concern of businessmen as demand begins to pick up. Several businessmen noted large price increases recently or expected sizable price increases in the near future.
The employment picture has improved somewhat in the District, and the unemployment rate has generally declined. Reports indicate that firms are continuing to recall workers. Also, isolated reports have been received of firms having difficulty in hiring labor in some areas despite sizable numbers of people drawing unemployment benefits. Latest data indicate that the pickup of employment in the District, however, may be lagging the nation as a whole and that the decline in District employment during the past recession was somewhat more severe than the nation.
No surge in loan demand was reported by banks and savings and loan associations, although demand is expected to pick up as the recovery develops. Savings and loan associations report their loan requests are primarily for financing older homes, although some slight pickup in new home loans was reported. Funds continue to flow rapidly into thrift institutions. The sharp increase in savings deposits in June was followed by another substantial but smaller increase in July. The smaller increase in July was attributed to competition from higher yielding Government and other securities as well as to increased spending by consumers.
All interest rates have increased in recent weeks. Mortgage rates in the St. Louis area are now in the range of 8 3/4 to 9 percent on an 80 percent loan, compared with 8 1/4 to 8 1/2 percent a few months ago.
Crop conditions in the District are mixed. Some areas are suffering from lack of rainfall which is expected to affect crop yields seriously. Other areas, however, report crops in excellent condition. Overall, a large harvest is still expected this fall, and some concern was expressed that rice production may exceed existing storage facilities.