Beige Book Report: St Louis
October 14, 1970
"Guarded optimism" describes most views of businessmen relative to current economic activity in the Eighth District. Except for the automobile strike, which is beginning to have an impact throughout the District, the major employment changes are seasonal in nature. Although home construction is still below levels of a year ago, industry representatives are not so pessimistic as in recent months. Capital investment plans generally remain unchanged. Because of recent adverse weather and the southern corn blight, agricultural production is below earlier expectations but is still generally good. Loans and deposits at commercial banks continue to increase.
A major employment disturbance in the District is the automobile strike, which has directly affected more than 9,000 workers in St. Louis. A number of automobile parts suppliers in St. Louis and other District cities have recently announced temporary layoffs. For the first time in several months, attrition and layoffs were not mentioned by District industries as a method of reducing production cost.
In Little Rock and Louisville, residential housing construction is singled out as being especially slow. In St. Louis, however, low-cost housing (under $16,900) is strong, and a general improvement is expected within the next six months. Potential homebuyer traffic has increased, and borrowing rates are creeping down.
Consumer buying is still restrained, but most businessmen expect substantial improvement after the automobile strike is settled. Total retail sales are still trailing levels of a year earlier, despite somewhat stronger promotional efforts. One major St. Louis retailer, however, reports some pickup in sales in recent weeks. Durable goods are moving slowly, and a number of automobile dealerships are changing hands in some areas. The chemical industry throughout the District reports sales below expectations, but a large St. Louis-based firm is planning for a moderate expansion of output in the near future.
Capital expansion plans generally remain unchanged, but some of the firms contacted indicated that internal cash flows for investment purposes were less than expected when the current investment plans were made.
The agricultural situation is mixed. Recent rains had some deleterious effects on the soybean crop in western Tennessee, but the overall yield for the District is expected to be high. The cotton crop in Arkansas and northern Mississippi is of lower grade than the average of recent years due to boll rot and overgrowth brought on by the rains. The corn blight is reducing the corn crop as much as 50 percent in some local areas. Overall, however, the crop will be only a small percent less than a year earlier in the District. The reduced corn crop nationwide has already had a major impact on average crop prices. To date, there has been little impact on livestock prices, but the higher feed grain cost is expected to have an impact on meat and other livestock prices in the year ahead.
Commercial bank loans and deposits have increased in the Eighth District. Savings and loan associations are reported to be liquid and are seeking to increase their loans.