November 10, 1981
Economic activity in the Eighth District remains sluggish. Current-dollar retail sales have tended to be stable over the past month with declining auto sales being offset somewhat by increased sales on other consumer items. Home construction dropped again in September, and this pattern appears to have continued through October. Representatives of financial institutions report some increase in total time and savings deposits as a result of All-Savers Certificates. Manufacturing activity remains steady with no significant changes in output reported. Agricultural output in the District is very good with production of most crops running well above 1980 levels.
Consumer Spending
Auto sales in the St. Louis metropolitan area
declined markedly in October. Only one of the auto dealers surveyed
reported an increase in unit sales, which was attributed to a heavy
advertising campaign. Other auto dealers reported unit sales ranging
from 30 to 50 percent below the previous month. The decline in auto
sales was attributed to consumer uncertainty about the state of the
economy and to the introduction of All-Saver Certificates which
purportedly caused consumers to postpone auto purchases.
Other components of consumer spending appear to have increased in October. Department store representatives reported dollar sales increases up to 6 percent over the previous month. Clothing and electronic products continue to lead the sales list, and retailers report that sales of major appliances are holding steady. Nevertheless, all retailers reported that unit sales were down as compared with the previous year and that dollar sales continue to fall short of the level they had anticipated earlier this year.
Construction
The number of single-family housing permits issued in
the St. Louis metropolitan area declined again in September. Home
construction is about 30 percent of normal for this time of year.
However, multiple-family building permits took an unexpected sharp
increase in September. Industry experts believe this increase was a
response to increased demand for rental housing but indicate that it
is too early to determine if it will continue or whether it will be
substantial enough to help the ailing construction industry.
Manufacturing
Nearly all of the Eighth District manufacturers
surveyed reported no significant change in production over the past
month. Chemical, textile and clothing manufacturers reported the
strongest sales, while production in building materials, electric
motor, and household appliances remains sluggish. Manufacturers
report changes in raw material prices over the last month ranging
from -1.5 to +5.0 percent and indicate that current raw material
prices are about 7-9 percent higher than a year ago. Only two of the
manufacturers surveyed reported plans for increased capital spending
over the next year, while none of the firms surveyed reported a
significant change in inventories over the past month.
Financial Developments
Commercial and industrial loans at Eighth
District reporting banks were virtually unchanged in October, while
agricultural and consumer loan demand decreased somewhat.
S&L's continue to be reluctant to make new mortgage loans. Mortgage rates on new conventional 80 percent loans range up to 19 percent plus substantial closing costs. However, some S&L officials reported that. they are making some FHA and VA Loans at 16.5 percent plus points.
Area financial institutions report some increases in total time and savings deposits primarily resulting from the introduction of All- Savers Certificates. The financial institutions surveyed reported that net new deposits from All-Saver Certificates ranged from 5 to 25 percent. One S&L representative reported that only 15 percent of the All-Savers accounts which were transferred from other accounts came from passbook savings. Demand deposits at Eighth District reporting commercial banks have declined about 9.5 percent in the first three weeks in October.
Employment
Employment in the St. Louis metropolitan area increased
.7 percent last month and the unemployment rate dropped from 7.8 to
7.4 percent. A shift recall at a local truck plant and seasonal
variations in employment were cited as the primary factors
accounting for the increase.
Agriculture
Farmers in the region are completing the harvest of a
near record crop. Yields of corn, soybeans, wheat and cotton were
larger than average. Prices received by farmers, however, were less
than expected and net incomes are generally well below planned
levels. Farm land prices are reported to be increasing at a slower
rate than in recent years and, in some instances, declines have been
reported.