September 16, 1984
Economic expansion continued during August and early September in the Eighth District. Expectations are for continued moderate growth over the rest of the year, and many planners assume that the expansion will continue at a reasonable pace throughout 1985. Department store sales and resort businesses were strong, but residential housing sales were below year-ago levels. Construction remained on a high plateau. Factory production and employment continued to grow, but new orders were mixed.
Consumer Spending
Sales at District department stores continued above year-ago levels
in August and early September. Several merchants mentioned that
there was a lull in activity during the Olympic games, but that
volume swelled afterward. Back-to-school sales were successful in
late August. Despite the overall sales strength, several merchandise
reduced prices of slower moving goods. Merchants are generally
optimistic concerning the upcoming Christmas season.
The Missouri resort industry did an unusual volume of business in the last half of August when normally activity begins tapering off. Weekday attendance at amusement parks, resorts and motels was up significantly, partly reflecting a new Missouri law delaying the start of the public school year until after Labor Day. Traffic was up over 60 percent at one major amusement park, and a large resort reported that its lodging units were 95 percent occupied compared to 60 percent at this time last year.
At several dealers in the District, automobile sales were sluggish in August and early September. Others reported favorable sales and noted that they could have sold more if they still had the popular models. On balance, sales were higher than in the same period of 1983. New cars apparently sold better than used cars. Two dealers were greatly upset over recent factory price increases. Although the average price mark-up was relatively small percentage-wise, the dollar increase was said to be enough to hinder significantly sales of certain models. Small truck sales continued to run slightly ahead of year-ago levels.
Housing and Construction
Sales of older homes continued at year-ago rates in August and early
September in the District, but according to builders, sales of new
single-family homes were off 15 percent from the same time last
year. Interest rates on fixed rate mortgages have declined nearly a
percentage point from the peak early in the summer, but rates on
variable-rate mortgages have changed little. Building costs and land
values continue to rise; partly as a result, the average new home is
slightly smaller than a year ago, and there has been a tendency to
reduce lot sizes.
Most home builders in the District remained busy, but the volume of unfilled orders has declined substantially. There has been an unusual amount of new apartment building in both Memphis and St. Louis. Nonresidential construction also continued at the earlier fast clip, with the building of many offices, roads, stores, hospitals, warehouses and hotels.
Industrial production
New factory orders were mixed during August and early September in
the District, but production and employment inched up slightly.
Demand was strong for motor vehicles and defense goods and there was
an uptick in the demand for steel, which had been weak. Some
businesses, such as synthetic fibers and plastics, noted a
plateauing. Other businesses experienced a slackening in orders,
largely because customers ceased building inventories. In the
southern part of the District, a foundry is closing and an aluminum
plant reduced operations because of declining sales, idling nearly
400. Because of projected flat sales over the next year, a major
appliance manufacturer announced it will reduce its employment by
nearly 1,700 in the next month; however, some operations are being
moved to other locations. Industrial prices have risen only slightly
on balance, and some profit margins have been squeezed. Foreign
competition is a major factor in pricing policies.
Banking
Business, real estate and consumer loans continued to expand in
August at 12 relatively large banks, but demand deposits declined
and there was little net change in time deposits.
Agriculture
Rainfall was uneven across the District during the growing season
causing crop yields to vary greatly. It now appears that in the
aggregate, District crops will be relatively large in 1984.