February 9, 1977
The coldest winter on record has affected economic activity in the Eighth District. Although the losses in plant operation and days worked have apparently been relatively mild compared to some parts of the country, losses have occurred over a wide range of industries in the District. The underlying strength of the economy is, thus, difficult to judge in view of the abnormal weather conditions, but the generally improving conditions in recent months do not appear to have been changed. In fact, retail sales in January were surprisingly strong. Part of this spending, however, was induced by the unusually cold weather. Furthermore, some of the production losses, which resulted from weather-induced inefficiencies and gas shortages, can be made up.
Retail sales have held up well despite the severe January weather. The composition of the sales, however, was heavily influenced by weather conditions. As a result, the experience of retail outlets varied widely depending on the types of products offered for sale. Fast selling items included snow tires, batteries, auto parts, and warm clothing. Some stores reported that inventories of many of these items were virtually exhausted. Even vacation sportswear was selling fairly well as winter vacations were spurred by the weather. Automobiles were also selling at a brisk pace, possibly reflecting weather-induced problems with older cars.
Manufacturing activity has been slowed somewhat by the severe weather and related energy shortages, though the loss in production and employment has been relatively minor compared with reports from other areas of the country. Lack of fuels, particularly natural gas, has resulted in some temporary losses in production and employment in the District, though particular regions of the District have suffered more than others. Plant closings due to fuel shortages have occurred in the Memphis and Little Rock Branch zones, while activity in the St. Louis zone generally has been unhampered by gas cutoffs. Most of the plant closings were only for a few days and the plants are now back in operation.
Beside fuel shortages, manufacturing activity has been hampered by other weather-related problems. Some plants have been hampered by lack of raw materials due to transportation delays and plant closings in other areas. For example, some automobile assembly plants in the St. Louis area have been affected by a lack of parts caused by plant closings elsewhere or by lack of shipping facilities. One assembly plant in St. Louis employing several thousand workers has been closed for a week and another plant has cut back on the number of hours worked. Also, many firms have experienced high absenteeism and inefficiency in operations induced by adverse weather conditions.
Some delays and inefficiencies have also occurred in the homebuilding industry due to the weather conditions. Most construction work has been confined to interior work and relatively few new foundations have been poured. These problems, however, are not expected to alter the long-term outlook for the homebuilding industry which continues to be quite bright.
Mortgage interest rates in the St. Louis area have held steady in recent weeks at around 8-1/2 percent on an 80 percent loan. Savings inflows into thrift institutions have continued briskly in January. The larger savings and loan institutions in the St. Louis area have recently reduced their rates paid on time and savings deposits. Some of the larger institutions now are paying rates 1/2 percent below the legal maximums, while others continue to pay the legal maximums.
Agricultural production has experienced weather-related difficulties. Poultry production has been less profitable due to increased heating requirements and reduced rates of growth. Cow-calf operators have experienced higher than normal losses of cattle, and heavy feeding of scarce hay and other feeds has been necessary. This year's fruit crop is believed to have been affected by the extreme cold. The peach crop in the St. Louis area may be down sharply while the apple crop may still be reasonably good. Tobacco markets in Kentucky were reported to be operating on a reduced schedule and sales were substantially below normal. A low level of soil moisture remains a potentially severe problem in many parts of the District.