September 15, 1976
Economic recovery in the Eighth District continues, but at a slower pace than in the first half of the year. Despite the moderation in growth, businessmen generally continue to be optimistic about future business prospects. Gains in retail sales have been unevenly distributed, reflecting both the nature of the recovery and unusual weather conditions. Manufacturing activity continues to move up moderately for a number of major products, such as chemicals, paper, and home furnishings. Capital goods equipment orders are beginning to increase. Home-building activity is mixed, with single-family home construction generally quite strong, whereas multi-family activity remains at a low level. On the agricultural side, lack of rain over recent weeks has reduced substantially expected crop yields in many parts of the District.
Retail sales have remained on a relatively high plateau over the summer months. Retailers report new fall software items are currently selling fairly well, Sales of certain big-ticket items, such as air conditioners and lawn mowers, were reported to have been sluggish over the summer months as a result of unusually dry and relatively cool weather. Automobile sales, on the other hand, continue strong, particularly among the full-size models.
Manufacturing activity continues to make gains, but at a slower pace in the past few months than earlier in the year. A large paper manufacturer noted that orders slowed in the summer months, but in the last 2 weeks some increased strength in orders has occurred. Appliance manufacturing has also been at a reduced pace in recent months which was largely attributed to a drop off in inventory demand. A representative of the chemical industry reports that most chemicals and plastic products are registering increases in orders, although demand for certain fiber products is weak. On the bullish side, advanced sales for new automobiles are reported to be quite strong, and two large automobile plants in the St. Louis area are planning to add additional shifts in October. One representative of the capital equipment industry reported that demand is currently picking up strength.
Single-family home building continues at a fairly strong pace in most of the District. However, apartment construction is still at a very low level. Reports from St. Louis and Little Rock indicate apartment vacancy rates are quite low, and some new apartment projects are being planned. In Memphis, no new apartment or condominium projects have been under way for a couple of years, but some of the previously started projects are now being completed. Some condominium owners in the Memphis area are offering special sales incentives, and some are offering to buy the condominiums back at the original price after 2 years. Recent figures from Memphis indicate that condominium sales doubled from June to July and in July were about 90 percent above a year earlier.
Nonresidential construction continues at a relatively slow pace. One contractor reported that new commercial projects of any size are hard to find. However, several institutional projects, such as hospitals and government buildings, are under way.
Savings and loan associations report increases in savings deposits in recent weeks at about the same rate as in June and July. Mortgage loan demand continues upward reflecting the increased housing activity. Mortgage interest rates are generally at 8 3/4 percent for an 80 percent loan, up from 8 1/2 percent a couple of months ago. All types of savings deposits at commercial banks, except for large negotiable CD's, have increased in recent weeks. Business loan demand continues sluggish, although increases in consumer and other types of loans have been observed.
The continuing lack of rain in many parts of the District over the past month has dimmed the yield prospects for corn, soybeans and cotton. Parts of Missouri have been severely hit by drought conditions and reports from Arkansas and Mississippi, indicate that crops in these areas also are being damaged by lack of moisture. Reports indicate that the Arkansas rice crop is generally in good shape, although the current prices for rice threaten to make production unprofitable this year. Soybean production is expected to be down from earlier estimates, and prices are relatively high. Some reporters believe that soybean prices will rise further as knowledge of drought damage becomes more widespread. Reports from Arkansas indicate a sizable increase in poultry production is under way.