February 11, 1976
The economic recovery in the Eighth Federal Reserve District is continuing according to recent reports from businessmen. Retail sales remain relatively strong after the Christmas surge. Most manufacturing firms likewise report increasing sales and are optimistic that further improvement will occur during the year. Funds continue to flow into financial intermediaries at relatively high rates, though mortgage interest rates remain stable. On the agricultural scene, crop farmers are making plans for large 1976 plantings.
Department store representatives noted strong sales in the post-Christmas season, following the excellent sales gains during Christmas. Most types of merchandise are reported to be selling well, with some improvement in big-ticket items which heretofore have registered less gains than other items. Reports by local car dealers are mixed. However, car and truck sales appear to be improving with domestic automobiles selling somewhat better than foreign cars.
Several manufacturing representatives noted moderate gains in their sales and reported that inventories are at desired levels. A major chemical firm reported sales gains late last year and early this year. Chemical products with rising sales this year include fabricated plastic products, petrochemicals, rubber, phosphates, and herbicides. A local steel firm has recently brought on line an additional blast furnace as a result of rising orders. A producer of both consumer and capital goods noted strength in consumer products, but no growth of demand for capital goods. A representative of a paper and boxboard manufacturing firm reported sizable gains in sales in recent months and believes the uptrend will continue this year. Apparel manufacturers, which have already experienced a substantial turnaround in demand, expect further increases in sales in the coming months. Institutional apparel, which until recently had lagged the upturn, was reported to have shown some strength in sales recently.
Latest employment data indicate that the upturn in the District's non-metropolitan areas has been stronger than in metropolitan areas. The rise in employment in District states has so far been about twice the rate of increase in major District cities.
Residential construction has increased somewhat, according to housing representatives. Several builders of single-family housing report optimism about housing sales this year. A couple of builders in the St. Louis area reported rising sales in recent weeks and they have already sold a sizable percentage of the homes that they plan to build. Multi-family construction has generally remained at a very slow pace throughout most of the District, but some improvement is expected later in the year. Although a surplus of multi-family dwellings has been a depressing factor in many parts of the District, especially the Memphis area, no overhang in multi-family units is reported in the St. Louis area. As a consequence of this small inventory, several analysts are predicting a sharp increase in rental prices this year in St. Louis.
Savings and loan associations report strong gains in time and savings deposits in recent weeks, continuing the upswing of last year. Commercial banks reported increases in time deposits in January, with declines in large certificates of deposit more than offset by increases in other time and savings deposits. The pickup in single-family housing construction has resulted in some expansion in mortgage loan demand, but the situation in multi-family construction remains a limiting factor to such demand growth. Despite the large quantity of funds available and the relative weakness of mortgage loan demand, lenders are reluctant to decrease mortgage rates. Some savings and loan institutions are investing some of their funds in installment-type consumer loans.
Bank business loan demand continues unchanged. One representative of a large bank noted the widening gap between bank lending rates and rates on commercial paper as one factor. Demand for consumer installment loans was also noted to be rather weak.
Crop plantings are expected to be larger in 1976 than last year. Recent reports indicate farmers will increase the acreage planted to most major crops, except soybeans. They are planning to shift some acreage from soybeans to cotton and corn, reflecting changed price relationships.