Beige Book Report: St Louis
September 9, 1970
A few scattered signs of improvement in economic conditions are apparent in the Eighth District, but pessimism is still the prevailing mood. Some major retail establishments report minor sales gains on a seasonally adjusted basis. Long-run investment plans are being revised downward in a few cases. Few firms are planning employment layoffs, but with the impending automobile strike and normal attrition, some further increase in unemployment is expected. Residential construction continues at a very low level, while apartment and office buildings are still being constructed at only a moderate pace. Farm commodity prices have, declined sharply in recent weeks and during the remaining months of the year are likely to remain lower than average prices since January.
Retail sales have apparently increased slightly throughout most of the District in recent weeks. Major retail establishments in both St. Louis and Memphis report some gains in August on a seasonally adjusted basis. Likewise, one large St. Louis chain with numerous stores in outlying areas reports sales increases in the smaller cities and towns.
Major manufacturing industries still indicate little change in long-run expansion plans. Some manufacturing plants have been closed, but. expansion continues in retail establishments, especially the discount type. There has also in recent weeks been some increase in inquiries relative to plant location sites in the St. Louis area.
There is little prospect for an increase in Eighth District employment in the near future. The larger manufacturing firms report little hiring and few layoffs, which implies a reduction in the work force through attrition. Expected employment gains in retail trade will likely be offset by some reduction of workers in the manufacturing sector. Defense employment in the District continues to decline corresponding with the national trend. Overall, the employment situation points to some further increase in the unemployment rate.
Business profits in the area continue on the weak side with little prospect for early improvement.
Residential construction is reported at a relatively low level throughout the District and is described as "very low" in St. Louis. Potential home purchasers appear to be switching their demand to apartments and mobile homes, at least temporarily. Apartment and office building construction continues at a moderate level. Applications for apartment rentals are reported to be most active in the low to medium price range. High interest rates, greater labor costs, and outdated building codes are being blamed for the reduced level of home construction.
Some banks report increased liquidity. One bank in the District, with $45 million of deposits, lowered its prime rate to 7 1/2 percent last week. Consumer loan demand at commercial banks is up, especially in Arkansas, where finance companies have been leaving the state.
Farm commodity prices have declined sharply during the past month, pointing to lower food prices and reduced farm incomes in the months ahead. Lower meat prices are in prospect for the rest of the year, compared with levels a year ago and earlier this year, but grain prices average somewhat higher, reflecting the impact of the southern corn leaf blight on production. Eventually, if grain supplies are reduced substantially, they will have an upward impact on livestock and meat prices.