October 11, 1977
Slowing in the rate of growth of some aspects of economic activity in the Eighth Federal Reserve District has occurred since the first half of the year. Businessmen generally remain optimistic, however, and few expect a further decline in the rate of expansion. Growth of consumer spending continues unabated. Business inventories are reported to be in line with sales. While growth of business loans at large banks remains slow, overall demand for credit continues to expand. Manufacturing and construction activities continue to expand moderately. Wet weather during the past week has slowed crop harvesting in parts of the District, but harvesting is still ahead of a year ago, and most crops are expected to be larger.
Consumer spending has increased somewhat in recent weeks from a mid-summer slump according to major retail store representatives. One representative in the St. Louis area reported rising sales for big ticket items, such as furniture and appliances. Retail sales were reported to be excellent in Little Rock as well as other parts of the District. Furthermore, most of the retail respondents remain cautiously optimistic as to sales in the fourth quarter.
All respondents report that inventories are being watched closely and that no excesses are present. The department stores reported some excesses in soft goods during the summer months as a result of smaller-than-expected sales, but in recent weeks these excesses have been worked off to desired levels. Builders generally report that no homes are being built except on order. Also, in the Memphis area the excesses of condominiums built up in the previous recession have been largely worked off.
Loan demand generally continues moderately upward. Outside the major cities loan demand is reported to be strong in all sectors of the economy. In the larger cities, however, the rising demand is generally limited to real estate and consumer loans, with commercial and industrial loan demand remaining weak. Savings and loan associations report continued strong savings inflows; however, savings deposits at the large commercial banks in the District have declined. Interest rates on real estate loans remain stable at about 8-3/4 percent. Rates on most other loans, however, have inched up along with the rates on other market instruments.
Production in the major industries of the District continues to expand but generally at a slower rate than in the first half of the year. In the manufacturing sector, major chemical firms reported slower growth in August and September than earlier in the year but did not consider this as a serious weakness. Manufacturers of textiles, fibers, boxboards, automobiles, apparel and construction materials generally report a more moderate uptrend in orders and production.
Construction of single-family homes remains at a high level throughout the District. Such construction in the St. Louis area is reported to be at the highest level in twenty years. The occupancy rate is relatively high in multi-family units, but construction remains relatively weak, especially in the St. Louis area. Commercial construction remains weak, but an increasing number of small projects is reported.
Crop harvesting is well underway in the District and large crops of
most commodities are expected. Weather conditions were favorable for
crop growth, but recent rainfall has slowed harvesting in some parts
of the District. Despite the large crops, gross farm incomes in the
area may not exceed
year-ago levels as the increased production will
likely be offset by lower prices.