July 14, 1976
Sales, production, and employment continue up in the Eight District, although at somewhat reduced rates according to reports from businessmen. Retail sales at department stores continued up at about the same pace as last month. Manufacturing activity is mixed. Automobile production is strong, but appliance orders have slowed recently. Home building continues to make gains, and mortgage rates have remained unchanged in recent weeks. Business loans at banks have likewise remained unchanged, although consumer loans have registered further increases. In the agricultural sector, most field crops except cotton are reported to be in generally good condition.
Growth in retail sales has continued in recent weeks, and retailers remain generally optimistic about future sales. Automobile sales have continued to make sizable gains from year ago levels. Department store sales have likewise increased; however, sales of some items at department stores have leveled off due, in part, to unusually cool weather in June and early July, which discouraged the sale of air conditioning and summer-ware items. Most software items were reported to be selling very well. Department store retailers report their inventories at desired levels, but some car dealers reported very low inventories of full-sized automobiles.
Manufacturing activity has generally improved from a month ago, but again the rate of gain has apparently slowed during recent weeks. Appliance manufacturers, for example, note a slowing in orders of refrigerators, freezers, and similar items. This is thought to partially reflect a slowdown in growth of inventory demand rather than final demand. Inventories of appliances, it was pointed out, were built up quickly in the earlier months of the year and are now largely at desired levels. Capital equipment manufacturers reported that capital equipment demand has been improving in recent weeks. Demand for equipment by utilities was reported to be low compared with recent years, but such demand is expected to improve next year. Automobile assembly plants producing the larger size cars have been at full capacity, though some plants in the St. Louis area are now undergoing extensive retooling. Aircraft manufacturing was reported to be stable. Defense-oriented aircraft production is fairly strong and increases are expected as defense spending increases. However, commercial aircraft production is still reported to be sluggish.
A number of reporters commented on the possibility that plant capacity was generally well below levels projected on the basis of trend for recent years. A representative of a major chemical firm indicated that obsolescence during the last two years was much greater than normal.
The home building industry remains on the uptrend in the District and commercial construction is beginning to increase. Single-family construction continues to proceed at a fairly strong pace, while multi-family construction is still at a very low level and has shown only modest improvement recently. Industry representatives expect a "shortage" of multi-family units in some areas of the District this fall if construction does not pick up significantly. Concern was also expressed about the sustainability of the upturn in single-family housing in view of the sharp price increases in homes and the possibility of higher interest rates. While commercial construction remains very low compared with most recent years, reports indicate that it is beginning to increase.
Overall employment gains have been registered in the District in recent weeks. Several businessmen commented that qualified workers were hard to find, despite the relatively high unemployment rates. Unemployment rates are below 5 percent in several of the smaller metropolitan areas, while in Memphis and Louisville, where the recovery has been somewhat weaker than that of the nation, the unemployment rate is substantially above the national average.
Savings and loan associations have experienced a slowing in deposit growth in recent weeks. However, funds are still reported to be quite plentiful for home construction as most associations still have sizable amounts of uncommitted funds accumulated from earlier deposit gains. The cost of mortgage funds has generally remained in the range of 8 1/2 to 8 3/4 percent in the St. Louis area. Business loan demand at banks has been unchanged in recent weeks, while demand for consumer installment loans has picked up.
Crops are reported to be in generally good condition in the Eighth District. However, the prospects for the cotton crop are uncertain at this time. Late planting, cold spring weather, and excessive rainfall threaten to severely affect cotton yields. In several areas, 10 percent of the cotton crop has been plowed under and put into other crops, primarily soybeans. Hence, soybean acreage and production probably will be above earlier estimates. Poultry production is reported at a high level, although observers pointed out that further price declines for poultry meats would lead to cutbacks in production.