Beige Book Report: Kansas City
June 17, 1970
The general pace of activity in the District is moving along on a plateau. Local activity is stronger where the economy has been experiencing a strong growth situation. The agricultural picture also continues to be favorable. At the same time, construction slowdowns, reduced defense activity, and labor strikes have slowed the economies of some areas. The residential construction industry continues to be plagued with a lack of mortgage financing. The construction industry also exemplifies the deeply imbedded impact of inflation, as may be noted by some current wage demands in the industry.
District retail sales, as indicated by selected larger merchants, are fair and in a few geographical areas good. Retailing for May and early June is running somewhat ahead of the same period a year ago; however, the dollar gain is not as large as the increase in prices, so that real volume is down somewhat. The only merchandise that is selling at lower prices is ladies' ready-to-wear, which reflects the need to move heavy inventories of styles being obsoleted.
There is some evidence that the average unit of sale has increased in size: there are fewer customers, and they are making larger total purchases. No evidence was uncovered among major department stores indicating that customers were downgrading quality in their purchases. Rather it seems that customers with higher and more stable income prospects have become relatively more important and are maintaining quality levels. Persons with reduced income prospects are limiting purchases to necessities.
Advance reservations at important winter recreation areas are reported to be slow, indicating that consumers are hesitant to make these longer-term commitments. This contrasts with a strong upward trend in this consumer activity during recent years. Special economic circumstances are having important effects on sales in some areas. For example, while retail volume in Kansas City has held up quite well to this point, merchants are increasingly noting the effect of the construction strike which is now 2 1/2 months old.
The construction industry situation in Kansas City is serious, and it may have implications well beyond the immediate area. Kansas City last year lost more man-days from strikes than any other area of the country. This year the laborers, whose current wage rate is $4.01 per hour, are asking for an increase of $4.00 per hour now and a total increase of $6.00 over three years.
Construction activity reflects a variety of local situations in the context of national financial markets and Federal programs. Highway construction generally is active throughout the District. Commercial construction is strong in some areas where it reflects urban renewal projects as well as other building, particularly office buildings. Current and anticipated construction of new factories and plants is weak throughout the District. Despite strong demand for housing in many areas, new construction of dwellings is slow throughout the District because of difficulty in obtaining financing.
The agricultural sector continues to add strength to District
economic activity. Cash receipts from farm marketings during the
first quarter of this year averaged a fifth higher, compared with
the favorable levels of the comparable period of last year. Although
this rate of increase is not likely to be maintained, all
indications point toward a substantial improvement over last year's
record-high levels of farm receipts. In addition to receipts from
the sale of a good wheat crop which is now being harvested, income
from livestock sales remains more favorable than was expected. It
also should be pointed out that payments under the various
Government farm programs will be made differently this year,
compared with other recent years. Payments on wheat certificates,
feed grain programs, and the cotton
program—which are likely to
approach three quarters of a billion dollars—will be made largely
during the next two months. These payments, amounting to about 10
percent of total cash receipts from farm marketings in the District,
will add substantially to the volume of funds in District banks.
These favorable income prospects for agriculture have been
responsible for relatively high levels of economic activity in rural
areas, even though many marginal farmers are discontinuing
operations.