November 2, 1983
Summary
Economic expansion continued during September and October in the
Eighth District, but the pace of the advance moderated. Retail sales
continued brisk, and the outlook is for a banner Christmas season.
Factory orders and production crept up, manufacturers' inventories
changed little, and capital spending plans were revised upward at a
few firms. Total employment increased, but with a rise in the labor
force, the unemployment rate declined only slightly. Construction
activity and auto sales remained strong.
Consumer Spending
Respondents throughout the District report that retail sales have
continued to rise since August. Sales at six major department stores
in September averaged 11 percent above the same month a year ago,
and early October receipts continued lively. Some smaller stores had
even larger year-over-year sales gains. Apparel and home furnishings
moved particularly well. Respondents attribute the better spending
trends to improved shopping weather, rising consumer incomes,
increased job security, and retail promotions. Merchants anticipate
an excellent Christmas season and are increasing inventories
moderately based on these expectations.
Sales of both new and used automobiles remained favorable in September and early October. A major St. Louis dealer sold more than double the cars sold in the same period last year, and six other dealers reported year-over-year gains averaging 21 percent. All reported that sales were made with price concessions. Truck sales also were improved.
Manufacturing
Orders and production at most industrial firms in the District have
risen since August, but the rate of gain was slower than during the
spring and early summer. The demand for consumer goods expanded at a
reduced pace. Orders for business equipment inched up slightly after
remaining depressed during most of the economic recovery. On the
other hand, some defense business has ceased increasing. Most
respondents anticipate a continued moderate growth in sales in 1984.
Some manufacturers sought to build inventories selectively, but with
the continued rise in sales, inventories were little changed. A few
firms revised their capital spending plans upward slightly, and
research and development budgets for 1984 are greater that in 1983.
Employment
Employment in the District rose in September and October, and the
outlook is for further gains in the remainder of the year. The
unemployment rate, however, decreased only slightly as the labor
force continued to expand. Since late summer, the major hirings have
been in the automobile and construction industries, but many
manufacturing and transportation firms have added marginally to
their work forces. Two large District employers announced that they
will increase their staffs significantly in November and December,
and retailers are planning to hire more than they usually do to
accommodate the Christmas rush.
Real Estate and Construction
Residential home sales in the District during September and early
October remained below the peaks reached last spring but were still
above year-ago levels. Construction of homes, however, continued at
a rapid pace in response to the backlog of orders. Costs of
construction changed little, with lumber prices declining and labor
costs rising only moderately. Industry spokesmen expect that sales
and construction of new homes in the St. Louis area during 1984 will
be 10 percent greater than in 1983. Commercial construction has
remained strong since August at about the same pace as earlier in
the year.
Finance
Real estate and consumer loans remained about unchanged at large
weekly reporting banks in the District during September and early
October, while commercial and industrial loans rose seasonally.
Demand deposits jumped 8 percent, but time deposits changed little.
Reports from eight savings and loan associations in the Louisville and Memphis areas indicate that outstanding real estate loans rose moderately in September. Withdrawals of deposit accounts approximately matched new savings received.
Agriculture
Farmers in the District this summer experienced the worst drought in
50 years, which reduced drastically the yields of corn, soybeans,
tobacco and cotton. Because of these lowered yields and the reduced
acreage planted under the PIK program, supplies of agricultural
commodities have been limited driving up grain prices. Because of
higher feed costs, many cattle and hog producers have slaughtered
more animals than usual. This increase in meat supplies has placed
some downward pressure on current meat prices. With fewer animals
for slaughter in the future, however, red meat prices are expected
to rise in 1984 about 15 percent from current levels.