June 25, 1984
The economic expansion continued during May and early June in the Eighth District but at a generally slower pace and with more exceptions to the upward course. Department store sales were somewhat greater than a year earlier, automobile sales were mixed, and housing sales decreased. Factory orders were up, but at a slower rate as businesses became more sensitive to possible inventory excesses. The general outlook is for further, moderate expansion for the next few months.
Consumer Spending
Sales at District department stores continued to rise in May and
early June, but merchants reported a slowdown from the large year-over-year advances recorded in the January through April period.
Merchandise at discount stores, however, continued to show large
gains and most soft goods were in demand. Air-conditioners sold
extremely well, reportedly because of higher incomes, memories of
last year's hot season and the beginning of summer. Repair shops and
other small service companies generally reported good receipts.
Although convention business was improved, restaurants and
entertainment businesses reported mixed results.
Auto sales in the District varied among dealers in May and early June. Five dealers reported sales were sluggish; six dealers stated that sales were strong, with one noting that May sales established a record for the agency. Smaller cars sold better than larger models, and truck sales averaged about 8 percent above a year ago.
According to builders and realtors, higher interest rates caused home sales to slow in May and early June. In addition, there were a few interruptions of construction by strikes which may have restrained sales. Must builders, however, will remain busy for several months filling back orders. There has been some new apartment building in the St. Louis area, financed by insurance companies.
Transportation
Rail traffic at two lines was 11 percent higher in May than in the
same month a year ago. Most items hauled were up; however, "piggy
back" traffic was up only slightly. One railroad reported ordering a
new locomotive despite idle capacity because of new fuel efficient
engines.
River traffic at the Memphis port during May was about average, while in St. Louis a barge line was liquidated because of lack of business. Petroleum shipments were little changed but grain was slow. Several trucking companies reported that business was down in April and May from a record month in March.
Industrial Production
New factory orders at District firms were greater in May and early
June than they were a year ago, but they are net flowing with the
same intensity as they were earlier in the year. There has been some
softening in orders by auto parts stores and appliance dealers. In
addition, a number of firms have trimmed orders with a view to
slowing inventory accumulation. A lumber firm cut its production and
idled 1,900 workers for a brief period to reduce inventories.
Inventories, however, are generally considered near desired levels.
Employment has increased moderately, and a few firms have marked up
prices. An industrial loan collector reported fewer delinquent loans
were being placed with the agency and a larger percentage of funds
were being collected than in the comparable period a year ago.
Since March 31, strikes over company attempts to restrain increases for both health benefits and cost-of-living have crippled Missouri lead mining production (nearly 80 percent of the nation's output). The strikes, however, have only had minor effects on the price of lead since there has been a worldwide surplus.
Agriculture
Because of rains, many farmers were late in getting crops planted,
some had to replant washed out fields, a number of farmers shifted
to soybeans from corn, and a few fields are still idle. Although
production will be hampered by the adverse weather, total output is
still expected to greatly exceed last year's crop which was reduced
sharply by the PIK program and the severe drought. Since many
farmers are reported to be in serious financial condition,
especially those who were highly leveraged and suffered from the
severe drought last summer and fall, this year's crops are critical
to their survival.
Finance
Commercial and industrial loans at 12 relatively large District
banks rose at an 8 percent annual rate from the end of April to
early June. Real estate loans rose moderately but consumer
installment credit declined. Time deposits grew while demand
deposits decreased. A few corporate treasurers have expressed
concern about banking problems, and have lowered some balances to
decrease exposure at any one institution.