November 12, 1975
Business activity in the Eighth District continues to recover from the recession, according to reports from district businessmen. The recovery is proceeding on a fairly broad front, as most retail, manufacturing, and residential construction representatives indicate improving business conditions. Exceptions to this general trend are the steel industry and large commercial building contractors. Employment has picked up in the district, reflecting a sharp turnaround in manufacturing employment. Loans outstanding at large banks increased somewhat in October. The prime lending rate has recently declined at district banks. Favorable fall weather conditions have been conducive to the prompt harvesting of generally large crops.
Retail sales continue to improve for both durable and nondurable items. Durable items for which increased sales are reported include automobiles, home furnishings, and some appliances. Wearing apparel items are among nondurable items which are selling well. Retailers are optimistic about Christmas sales, since they sense that the general buying mood of consumers is improving.
Manufacturing activity continues to improve over a broad front, as inventories have stabilized and final demand has picked up. Reports from industries associated with homebuilding indicate a continuing increase in demand. Such items as metal connector plates used in construction, paints and coatings, and durable items used in homes are showing improved sales. Chemical manufacturers indicate a slow improvement in plastic and fiber demand buoyed by increased sales of homes and automobiles. One manufacturer reports that in his efforts to buy certain industrial equipment he discovered substantial lag time in delivery of equipment, whereas only a few months ago the lag was less. A manufacturer of equipment used in the petroleum industry indicates a strong turnaround since last May. Reports indicate a pickup in metal fabrication industries as well. On the other hand, a major aircraft manufacturer reports order backlogs are below a year ago, and a steel representative now expects that a strong recovery in this industry may not get under way until next year.
The construction picture is mixed. On the one hand, construction of single-family dwellings has increased substantially in the district, while multi-family dwellings and other types of commercial and government construction are generally in a depressed state. Multi-family home construction in St. Louis is at a virtual standstill. Occupancy rates, however, are increasing on existing structures, and substantial increases in rents are expected in the next few months. While a substantial amount of commercial construction is now occurring in the St. Louis area, other areas in the district report that prospects for new contracts are not very promising. An Arkansas construction firm representative reports an almost total lack of large contracts at the present time, and none are expected in the next few months. Contracts currently being let in some areas have four to five times the normal number of bidders. A construction representative in the Louisville area expects building projects and highway construction to be down in 1976 and utility construction to be about the same as this year.
Latest employment data for the district show an upturn in overall employment in the third quarter. Manufacturing employment gains were especially large compared with the increase in the nation as a whole.
Business loans increased slightly at large commercial banks in the district during October, but in line with the national trend toward lower rates, several banks in the district cut their prime lending rate. Consumer installment loans also rose in October, probably reflecting the pickup in consumer durable purchases.
Reflecting very favorable fall weather, the harvesting of crops in the district is nearing completion and is much ahead of last year. In addition, fall plantings of wheat are proceeding at a rapid pace. Indications are that relatively large crops of corn, wheat, soybeans, and rice have been harvested. Rice production in Arkansas is now expected to be less than anticipated earlier due to lower yields per acre. Nevertheless, production will be relatively large in view of the large increase in acres planted. This production combined with large rice crops in other areas and an uncertain world demand has led to depressed rice prices. On the livestock side, prices are generally strong, especially for poultry and pork.