January 20, 1984
The upward momentum of the economic expansion in the Eighth District continued in December and early January. The Christmas season surpassed retailers' optimistic expectations despite severe cold weather in the last two weeks, and after-Christmas sales have been satisfactory. Manufacturing has been improving almost across the board, most transportation companies are moving more goods, and employment has risen markedly since early fall. Real estate sales and construction activity have remained strong despite a seasonal slowing.
Outlook
Employers in the St. Louis and Memphis areas, according to recent
surveys, anticipate slower growth in total employment over the next
three months. Less than 20 percent of the employers polled plan to
hire additional workers in that period, a similar proportion expect
some staff reductions, while over 60 percent plan virtually no net
changes. Three months earlier, 27 percent of the St. Louis employers
planned staff additions and only 7 percent expected reductions.
Consumer Spending
District retailers use words like "tremendous" and "fantastic" to
describe their Christmas sales. One large chain reported December
sales 38 percent above the previous December, and most stores
reported gains in double digits. Most merchandise sold well, but the
willingness of shoppers to invest in "big ticket" and high-quality
items was particularly impressive. There yam no need for panic price
markdowns to move merchandise as in the previous year, and hence
retail profits jumped more than sales. After-Christmas sales were
generally described as satisfactory, but year-over-year comparisons
were lower than in December.
Manufacturing and Employment
Manufacturing activity continued to expand in the District during
December and early January. Orders are up, backlogs are increasing,
and some firms are implementing capital spending plans. Most capital
spending continues to be directed toward productivity improvements,
but some is for capacity expansion.
With greater production, employment has continued to rise. An automobile company increased its employment by 1,500 in early January, both to staff an additional shift and to reduce overtime payments. However, unemployment rates have shown only a slight decline in recent months as the labor force has also continued to expand.
Real Estate and Construction
Real estate sales and construction (adjusted for seasonal
influences) have remained at high levels since November. One builder
sold 15 relatively high-priced homes in the first week of January,
which was beyond his expectations. Six other homebuilders reported
heavy shopper traffic through display homes, and a major realtor
said sales of older homes were strong for December and the first
half of January.
Transportation
Several truck lines in the District reported improved business in
December and early January; for one line, December was the best
month in four years. Two railroads reported business up nearly 25
percent in December from the same month a year earlier, with gains
in most general business lines. Barge traffic at the Memphis port
has been gradually increasing. On the other hand, one company owning
150 barges recently filed for bankruptcy. Barge traffic in the St.
Louis area was adversely affected in late December and early January
by the unexpected quick freezing of the Mississippi River further
north, locking in many barges.
Agriculture
A large number of acres were planted in winter wheat despite the PIK
program, and the crop appears to be surviving the cold weather.
Early indications are that plantings of corn and soybeans this
spring are likely to match those of the large 1982 plantings. As a
result, sales of seed, fertilizer and herbicides are improving.
Finance
Commercial and industrial loans at large District banks declined on
a seasonally adjusted basis during December and early January.
Savings and loan associations have been making few loans to
businesses, even though they have had authority to do so for more
than a year. Two St. Louis area associations, however, have recently
added additional lending officers and are aggressively seeking
business loans. Most District associations have less than 1 percent
of their assets in commercial loans, and even the aggressive
associations are nowhere near the Federal limit of 10 percent in
1984. Nonetheless, these percentages have been rising and are
expected to continue to rise as associations gain experience.
In general, the financial health of the savings and loan associations in the District has continued to improve. Several Louisville and St. Louis savings and loan associations, however, reported an increase in delinquencies on mortgage loans in December.